Kalpa

Are We Near a Peak in Farmland Prices?

dvl and egg,
You obviously both believe inflation is where we're headed. I don't have a crystal ball, and am still worried about getting past working out of this deflation we're in. Our government will take on more debt to further bail out our banks before this is over. The reality is, either way, we have become a much less affluent nation. If farm programs and ethanol subsidies get scaled back, plus higher inevitable property taxes go up on ag land, and perhaps fossil fuel costs go up, you may see the ever squeezed farmer eek out less of a profit. And then, land will go down in value. The fact is there is a lot of overproduction of corn and soy in this country due to farm policy and the time may come that that policy changes. Then what happens to farmland prices? Times are too uncertain right now to make anything a "given". If, on the other hand, we are headed for inflation, right now could indeed, be a good time to buy ag land because interest rates are relatively low.

This Muddy Economic Picture

Thanks, everyone for your good comments. Though I kept the article on the somewhat neutral side, I agree with comments here about the ominous conditions looming in the banks and unemployment numbers which accompany this massive deleveraging, and I definitely agree about the political failings. They have caused this. They have prevented us from fixing things. They loom large in our future and could bring us down eventually, if not this time. That's a whole 'nother subject for a whole 'nother day. To Bob, also, this is supposedly a democracy, though a corrupted one, so we have to blame ourselves and we the people for allowing it to happen to some extent. Politicians pay attention to squeaky wheels and to poll numbers. Don't get me started on complacency, as it's one of my favorite subjects!

Erosion in the M2:M1 Relationship and the Burgeoning Eurodollar Bubble

Romeo
Thanks for your article. Do you discredit the two entity's which now chart M3 or why do you not mention them?
I wrote this recently:
seekingalpha.com/artic....
I'd be curious to hear your comments.

Recession Is Over; Depression Has Just Begun

Great article! thanks!

First-Time Homebuyer Tax Credit Program: Morally Hazardous?

Einstein, you made me laugh until I cried. However, now that I've started crying, not sure I'll be able to stop.

Agricultural Commodities in the Face of Deflation

socrateazz
I agree with all you say and I meant for fossil fuels to be all encompassing and include fertilizer. Thanks for your valuable and interesting comment and best of luck.

13 Agriculture Myths Busted: This Bubble Is Ready to Pop

delta ag
Thanks for your informative comment. My only response is that, as far as deflation is concerned, one should avoid debt, so I would not want to see anyone taking on a huge debt burden right now to buy farmland. If they inherit it or pay cash it would be ok, especially if they plan to live on it. As for labor, I see more migrant workers on industrial farms and as jobs are lost in this deflationary period forthcoming some of those workers can go to the farms, but I'd expect the local/regional fruit & vegetable markets to be based primarily surrounding cities and towns. One more consideration would be to expect higher and higher taxes on farmland because this nation needs to tax everything it possibly can to pay off this massive debt burden. I should have another article up soon addressing some of these other issues (now on my blog).

Remember $20 Oil? Looks Like It's Coming Back

GLTurner:
Gulf Oil CEO Joe Petrowski also predicted $20 oil for '09 in December of '08. And he had also correctly predicted on Oct. 14, 2007, that oil, then trading at $83.69 a barrel, would rise to $100 within six months. He thought that when speculators deserted it, it would overshoot on the way down. His prediction was a little early, if these guys end up being correct. Neil Barofsky announced the bailouts will exceed $23 trillion in costs to the US Federal government today. Brace yourself. Figure out how that will play into your crude price. This nation is bankrupt.

Remember $20 Oil? Looks Like It's Coming Back

ducat
I realized my error of mentioning compounding as soon as I made the post. Thanks for pointing it out. But, it is still a 1.25% oversupply above demand, which he predicts in his statement, "Supply is outpacing demand by about 1 million barrels a day, he said."

Sorry, you lost me on your last statement. Do you think that prices will not fall from their current level until we have a daily surplus of 5 million barrels per day? Do you know how much empty capacity is currently available for storage?

Of course, once we get to a price below the cost to produce (varies, I know) the exporting nations will be motivated to decrease their production. And then, the cost can resume upwards all subject to demand, of course, which I'm probably expecting to be bleaker than many here.

Remember $20 Oil? Looks Like It's Coming Back

William

Or, 1.25% per day excess global production. I wouldn't mind that kind of compounding on my checking account.

Remember $20 Oil? Looks Like It's Coming Back

And from today's WSJ (on gasoline savings):

.......Crudely calculated, the $1.58-a-gallon savings compared with last July equates to an extra $222 billion in drivers' pockets, annualized.

........ a world average price of just under $3.50 a gallon(gas), down $1.46 over the past year. The implied annualized saving for consumers, globally, approaches half a trillion dollars.

Remember $20 Oil? Looks Like It's Coming Back

Professor Banks,
Will you be speaking - or be present at the ASPO conference in Denver this fall?

Remember $20 Oil? Looks Like It's Coming Back

Anyone's view here on whether this $20/b oil prediction comes true or not probably depends upon your overall view of the economy. I happen to agree with Verleger that we are in a serious global deflationary downturn which may last a few years. My prediction would be that the $20/b price could be possible once this sucker's rally ends and more of the unresolved solvency problems resurface and need to be confronted.

I agree with "The Greates...: above comment that nations don't decrease production because they need the income. This is a key issue to understanding this situation.

13 Agriculture Myths Busted: This Bubble Is Ready to Pop

Subsidyeye and Derengow:

The sources for your 2 questions are as follows:

1) In 2009, projected corn use for ethanol production will actually go down by 100 million bushels, according to recently released data.

in.reuters.com/article...

2) According to one source, land values have gone down 20% already in other countries, which would suggest the U.S. is lagging in a farmland price correction. Prices are down 18% in Brazil, 12% on the Canadian prairies, 20-35% in Russia and Bulgaria, and 70% in the Ukraine.

www.economist.com/dail...

Now, Dodger you have outworded me and I cannot keep up and I also fear that the censor police here at SA will lock you up, but it was good to laugh out loud today! I imagine that a small % of readers here appreciate James Joyce but I might be wrong and I wish I could read German to fully appreciate him. As, for architecture, I won't comment or I fear I'll get you started down another off topic path and punish these dear readers who are serious about farmland values and have important decisions to make!

13 Agriculture Myths Busted: This Bubble Is Ready to Pop

Thanks for all of the comments. For now, I only have time to say that I'm afraid some of you naysayers are missing the big economic picture and it all goes back to my third sentence:

Commodity prices, like the oil story we are now witnessing, are directly related to the economic health of individual nations throughout the world.

And, yes, this focuses only on the U.S., and as I stated Ag land prices have already fallen in many countries throughout the world.

ArtfulDodger--
A classicist, I should have known! You pulled me in hook, line, and sinker. My nighttime reading right now is James Joyce.