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n. Illinois | An interesting concept for sure.
Here is how it's playing out in real time now. Your data from 2021 is out of date. 2023 is turning out to be a very poor earnings year. Losses in 2/3 of all operations I have seen full year results so far. Univ of Illinois using FBFM data is projecting a cash return on a corn/SB operation in our part of N. Illinois to be roughly $333/ac down from $781/ac in 21 and $674/ac in 22. So EBITA is currently crashing. the average for the years 2014-2019 was $340/ac so we are basically back to those same levels. The other part of the equation is the cost of money. and that unfortunately is higher as you are all aware. The 10-year t-bill the rate that drivers all mortgage loan rates averaged 3.92% in 2023 and currently for 2024 is averaged 4.2% So the calculus on land values is always (cash return / cost of capital)= land values. Cash return is down, and cost of capital is up. Land values will react. Land values are a lagging indicator and we have not yet seen the reaction, but the mathematical rules have not been repealed. Be very careful on your investment into low yielding assets when the cost of capital is high. Cap rate of farm land in our immediate area for 2023 was 2.26% down from the 5-7% return in the 2020-2022 time period. Farmland Cap rate margin over the 10 year t-bill is normally positive by 1.2% but in 2023 it was a negative margin. Have never seen that happen before so another reason to be cautious. | |
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Farm level Debt / EBITDA
