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Bubbly farmland prices pricked?

  • After more than doubling in some Midwest states in the past few years, farmland values have begun to bear the brunt of tumbling corn prices. Wheat and beans are well off historic highs as well.
  • Analysts assure a repeat of past collapses is unlikely as farm income remains strong and debt levels low, but a "recalculation" is at hand. "Profits will be tighter," says a 3rd-generation Illinois farmer. "There's not going to be near the returns, and guys will have to be careful how much expenses they've got into an acre." It's not exactly the kind of thing Deere (DE -1.6%) or AGCO (AGCO -0.9%) investors like to hear
  • Winter is typically the busy season for auctions, but this year has seen a number of "no sale" results. In Iowa, 6.7% of auctions failed in 2013, double the amount in 2012. The USDA forecasts farm incomes will dive 27% this year from 2013 to the lowest level since 2010.
  • Agribusiness ETFs: MOO, PAGG, CROP, VEGI
Comments (4)
  • seethrudanoise
    , contributor
    Comments (87) | Send Message
     
    i watch farmland prices like a hawk
    13 Feb, 11:24 AM Reply Like
  • Rhinoish
    , contributor
    Comments (83) | Send Message
     
    Yikes. Don't like the sound of this
    13 Feb, 12:22 PM Reply Like
  • jjmc2001
    , contributor
    Comments (1272) | Send Message
     
    I have a couple of comments on this weak attempt at a news article. First of all it gives us a link to a paid site that presents merely anecdotal data. Secondly anyone who has any knowledge of farmland prices knows that over the last century they are very closely correlated to net farm income. While that may come as a shock to the uninformed just think about the concept in pure financial terms: An investment is only worth a perceived future income stream. All the rest of the boom and bust of farmland prices is caused by speculation.
    If you believe what I have said so far then it only makes sense that with declining commodity prices predicted in 2014 that farmland prices will not rise as dramatically as they have in recent years. Note that I did not say fall as I have yet to see any real evidence of that recently in the areas of the Midwest that I pay attention to. It may happen but hasn't happened yet. Now that we have a Farm Bill passed and some input prices moderating from 2012 & 2013 crop years 2014 is shaping up as perhaps a return to "normal" times in terms of farm income.
    As a long term investor (in farmland and other real estate asset classes) I have been doing everything I can to maximize my yield (money not crops). This includes restructuring leases (using flexible rents), installing drain tiles, terracing, etc.
    A modest pullback in actual farmland prices is not a worry to any farmland owners that I know as we have seen an incredible increase in the last few years.
    Now getting back to this alleged news story. What is the point?
    13 Feb, 12:39 PM Reply Like
  • fuzzymc
    , contributor
    Comments (102) | Send Message
     
    The best value for farms was to plant Houses not crops!
    13 Feb, 01:00 PM Reply Like
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