Hennepin, IL | white shadow - 5/30/2023 21:53
Today there is just way too much cash in too many hands for land to come down much. The burn rate of excess cash is what will make it come down and not only Agricultural cash but investor cash also. Some parameters I see affecting the burn rate.
Heard the same thing in 12/13. Took less than 36 months for the fire sales to begin and another 12ish for them to get real hot.
How long has it been since you heard of the Government trying to manage supply by set-aside acres or even discussion of it.
4 years almost to a tee. Not as drastic as the actions in the 80's but there were definitely talks. Just do a search on here, likely the winter of 18/19.
We have a tremendous amount of demand today for grain and supply has worked very hard to meet that demand-----what happens if tomorrow with the wave of a Governmental gavel, ethanol goes away.
Definitely a concern, but IMO not near the concern it was 3-6 years ago. Oil gets cheap and corn doesn't, we can revisit that conversation.
The lack of over production is a recent phenomenon while historically we were always trying to manage excess supply. WE LIVE IN A MORE FRAGILE WORLD THEN WE EVEN WANT TO THINK ABOUT, and a lot of that fragility is directly caused by number one above---Governmental policy.
As always, a very good post. I can definitely agree with things being more fragile than they seem in the short term, but more resilient than you realize in the big picture. Back to the land discussion, I think there is a point that many are missing mostly because it hasnt been the case in the past downturns. It's who is actually holding land now. Institutional investors hold a growing % of that 82% of Iowa land that has no debt. In the 80's, farmers would hold land until it was really their only option to liquidate. Didn't matter what the price or returns were, they were going to hold until they couldn't. I doubt you'd be able to say the same for investors with no attachment to that land or the income it represents. Conversely, if there were a string of poor years, it could be in the fund managers' best interest to liquidate, take their losses, and move on. I'm sticking with my call that IF we have a long enough downturn to get investors starting to pull out of farmland, the door may not be big enough. |
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