Is This Farm Boom Different?!
The Kansas City Federal Reserve just released an issue of their Main Street Economist report that summarized their 2012 Agricultural Symposium held in July. We had previously done a quick post on this, but the latest issue does an extremely good job of summarizing the data presented at the Symposium.
History does seem to repeat itself and based on the data from the symposium, there is a very good chance that at some point, the farm boom will correct itself. Most likely it will happen to the larger more leveraged farmers and perhaps livestock operators who have had several bad profit years. Although most farmers have record liquidity now, there are more farmers (as a percentage) that are highly leveraged than there were in the early 1980s right before the correction to that boom.
The confluence of record low interest rates and high cash rents have led to the current increase in farmland values, however, the increase in these values is increasing at a higher rate than cash rents. This may not be sustainable.
I would highly recommend reading the six page report.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Comments are closed.