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SW MN | Two different things. Original poster talked about liquidity crunch. Your most recent response was to a NW comment. Both posters are correct. Your comment about paid off land creates cash flow is also true, but that is an asset paid off. If you bought a piece of land say 5-10 years ago and leveraged to buy it, you still have the payment, but its worth 20-100% more than you paid for it. Sure your NW went up because of the asset value change, but your cash flow hasn't because you still have the payment.
Liquidity is being bled out in a lot of places. NW doesn't pay the bills until you sell the asset, but it can give you a longer rope than the next guy. A lot of farmers are asset rich and cash poor. It has been this way for nearly our entire existence.
I don't have a clue if we will repeat the 80's or not, but we have so many similarities to the late 70's now that it makes a guy pause. Rampant inflation in the economy makes making enough money to purchase the next piece of land/equipment/building seem out of reach. Our purchasing power is constantly being eroded with inflation, and couple that with higher interest rates and we have the potential recipe for severe problems. Our government is spending money well beyond our means, at an accelerating pace, with no real solutions to curb or fix it.
I know it is a one-off buy, but that $32k piece of dirt in Iowa just screams insanity in the current environment. At best with a $500 A rent equivalent, that person is looking at a 1.6% return before taxes (income and property). You can get 3x the return in a simple treasury bill for the same period that it would take to pay for that land if every dollar it produced went to the principal. The P/E ratio of farmland is getting so far out of reach to the income it can generate.
When I graduated high school, until today (30 years) the amount of collateral/equity needed to get the piece of real estate bought has went from about 1.5 acres to 1 to about 5:1 and keep it at a reasonable cash rent equivalent payment after property taxes.
I understand why young farmers are getting disillusioned with the thoughts about being able to buy farmland. | |
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- Doesn't look good , - coup : 12/3/2025 17:31
- RE: Doesn't look good , - Lotts_Valley : 12/3/2025 17:51
- RE: Doesn't look good , - earp : 12/3/2025 18:40
- RE: Doesn't look good , - 69Cat : 12/3/2025 18:47
- RE: Doesn't look good , - jpron : 12/3/2025 19:52
- RE: Doesn't look good , - cv107 : 12/3/2025 20:40
- RE: Doesn't look good , - T-rowe : 12/3/2025 20:48
- RE: Doesn't look good , - Pofarmer : 12/3/2025 21:33
- RE: Doesn't look good , - Keep on Truckin : 12/3/2025 22:20
- RE: Doesn't look good , - white shadow : 12/3/2025 23:15
- RE: Doesn't look good , - Deere6 : 12/4/2025 05:22
- RE: Doesn't look good , - holi583 : 12/4/2025 09:07
- RE: Doesn't look good , - Jackrabbit : 12/4/2025 09:14
- RE: Doesn't look good , - mjl : 12/4/2025 09:48
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Doesn't look good ,
