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The Delta | I have purchased around 400 acres this year, at reduced prices. I disagree with most above statements.
Your land is only worth what it will produce. No more no less, its a floating number. I paid $2500 for ground that wouldve brought 4000 2 years ago easy. The last time I saw irrigated land sell for that price, i was a freshman in high school, say maybe 2004/5?
Bank are pulling purse strings, alot of lenders wanting 30-40% down on land. That means they think its going down. I can buy homes or commercial property at 5-10% the same bank. Any indicator?
In my facebook news feed ive seen several established farmers asking for prayers, and even declaring they wont pay out this gear currently. Its ugly. Its really ugly, this is an expensive crop so far. These guys needed a cheap homerun with 3x better weather. Rent negotions have just started, and alot of land is being walked away from. This will be interesting
Heres part of the problem, i priced new 20yd scrapers, in a tandem setup at 255,000$ this week. Look at how many acres must be farmed just to pay for that machinery? They are neccessary down here.
The same with other more frequently used machinery, 85,000 for a 645FD? I think 85k will buy a 9770 at auction this winter, with a header.
What will this mean for new money in ag? The land investors and funds bought in at the highs, can they take a slip in value? We shall see whether they are near sighted or not.
Alas, you all know the domino effect. We are all waiting for the domino to fall. The first investment group that fire sells land and jumps out, others will follow. If farmers arent standing in line to pay their already top of the market cash rents, they have no dividend, or returns are dismal. Do you think stockholders care? No, their money will find a new home.
I have heard 100 times from young guns about how this is their start, their time to shine. No its not. A bank wont chance you, when someone who has put a lifetime into this couldnt make it work. Cheap is a relative term, if no one has the money to spend, its not cheap enough.
You can scream interest rates this time will save you, the difference is bank regulation. In the 80s creative finance and your lenders could get you through it on a tight wire. Nowdays their hands are tied and regulators are hunting ag loan's. The fed predicted this bubble a few years ago.
Edited by Justin ArkMo 7/21/2016 10:41
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Thoughts on crop land values
