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Feb 09

From Boom to Bust? Farmlands Are In Trouble

From Boom to Bust? Farmlands Are In Trouble

 

From Boom to Bust? Farmlands Are In Trouble

From Boom to Bust? Farmlands Are In Trouble

Many farmers are facing higher debt as a multiyear drop in prices for corn, wheat, and other commodities plagues on. That is pushing more farmers out of business. The Farm Belt will soon have fewer than 2 million farms, the lowest in years.

Still, economists aren’t predicting the crisis to be as severe as the one that struck the Farm Belt in the 1980s, in which farmland values plummeted and interest rates soared.

Economists expect farmland values to fair much better this time around. After all, farm incomes reached record highs just in 2013. Many farmers still have significant cash reserves. Interest rates are still relatively low too, despite recent upticks.

“For some, the slump is an opportunity,” The Wall Street Journal reports. “Farmers with low debts and enough scale to profit from last year’s record harvests could be in a position to rent or buy up land from struggling neighbors.”

Nevertheless, lenders say farmers are going through their saving fast. They say  younger farmers – without sufficient reserves — and large growers – those who may have expanded too much during the boom years — may be the most vulnerable. Large growers may have accumulated too much debt in recent years as they expanded operations and also locked into multiyear land leases at high rents.

“The potential for a big crisis is real,” says farmer Less Scheufler, who has expanded his farm nearly 10-fold over the years. “If things stay similar to how they are now, you haven’t seen anything yet.”

Source: “The Next American Farm Bust Is Upon Us,” The Wall Street Journal (2017)

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