Oswald No-Till Farm Cleghorn, IA | Watching the thread, a number of things in my mind have an impact and I certainly don't have a crystal ball nor mental time right now to min/max the matrix.
no particular order on the issues and "sayings"
1- "They aren't making any more of it"....... so where are countries (like China) investing in agriculture????
2- Interest rates are really low, thus the discounted value of future income is significantly different than at double digit rates.... makes it hard to compare to prior years. So, for investors, a "dollar" invested now is cheap money.
3- I've always said that land is a great place to store money if you have money to store.
4- However, in a low margin environment, relatively low equity (thus magazine front page high IRR) operations don't have cash to store in land. Who is left with cash to buy land if "renters" can't should a volume of investor acres come to market????
5- Low margin, low land equity means low resilience in tough times thus a big need for significant risk management. Subsidized crop insurance is actually a subsidy to low margin operations which can be the high volume gorilla in a neighborhood pushing rent values around.
6- They say land is being bought with cash. I am sure that is true to a degree. But at some point, cash available for investment AFTER income tax (going up) dries up. The marginal tax rate for those able to throw millions at farm land will not be going down in the near future that's for sure.
So, I would argue that the net effect of Federal "Farm" policy and crop insurance subsidies over time has been to drive the transition from higher margin and equity to operations with less margin and relative equity. Thus, in the game of owning land assets, the relative purchasing power and resilience of "farming" farmers has declined. Farmers are handling more commodity volume (including the dollar bill commodity) but less is sticking at home and in the community..... everyone wants a piece of the new wealth from the land and are figuring out ways to get it. |
Land Market
