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n. Illinois | Land values are a lagging indicator. we first have to have poor financial results (2023 looks like that might happen) The Fed has already made the cost of capital higher, It takes 7.5% to get 30 year fixed rate vs. just 4.5% before the Fed started their fight against inflation. So as cash returns to corn and soybean fall back to reality $350-$375/ac vs +$600/ac the last two years and you have to actually use 7.5% as the cost of money. your looking at land values dropping from their current levels of +$15,000/ac to something under $9000/ac If the Fed doesn't get inflation under control and keeps raising rates then the down side is even lower.
Watched a large +7 million dollar deal get approved that in the end has a debt payment per acre of $700 on corn/SB ground that will soon revert back to normal returns of $350-$375/ac.
Heck back in 2018-2019 it didn't gross $700/ac
I think they can make that up on volume.
But hey its a loan/av of less than 60% who could get hurt.
Same mistakes made back in the late 70's early 80's are being repeated.
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Land values
