Farmland Prices and Capitalization Rates Edge Lower

9270364529_b9860cb75e_m

by Brent Gloy

Numerous farmland surveys (Iowa State, KC Fed, Chicago Fed, Purdue) now seem to be clearly indicating what many had expected for some time, farmland values are heading lower.  This is not surprising given how sharply farm incomes have fallen.  As we pointed out last year, the declines in income have pushed the rate of return to owner operated farmland very low.

Given that both cash rents and farmland values have started to decline, we thought that it would be interesting to examine these values and the current level of farmland capitalization rates on farmland. Continue reading

A Farm Debt Repayment Problem? An Update

14045007375_1294b65708_m

by David A. Widmar

Last year we took a look at farm debt delinquencies and concluded that, based on data through the end of 2014, a farm debt repayment issue had not surfaced. Given the early indications that aggregate net farm income would fall in 2015, we noted this would be an important measure to watch moving forward.

As expected, 2015 was a financially painful year for producers as the USDA reported net farm income across the entire country fell 38%. The drop from 2013 through 2015 was more than 55%. These large, rapid declines may leave some producers in a tight financial spot, especially when it comes to fulfilling debt obligations. Thankfully, the Kansas City Federal Reserve Bank does a great job of monitoring this and publishes data about farm debt delinquencies in the Ag Finance Databook. This week, we revisit the latest farm debt delinquencies data and evaluate conditions through the end of 2015.

Continue reading

Head Scratching on 2016 Prospective Plantings

seed

by Brent Gloy and David Widmar

With the release of the March 2016 prospective plantings report the USDA weighed in on what we saw as one of the top questions for 2016:  How many acres of corn and soybeans will U.S. producers plant in 2016?  Their answer: 93.6 million acres of corn, 82.2 million acres of soybeans, and 49.6 million acres of wheat.  These estimates were substantially different than those expected by the grain markets and left many people scratching their heads as to why there would be such a large shift toward corn acres.  Continue reading