Tuesday, December 13, 2011

Bad Economy? Yeah Right - Not in the Farming Heartland

While I believe in the long term thesis in farming (indeed I said in 2007-2008 farmland would probably be the best long term i.e. decades long, investment) year over year gains of 40% in Nebraska and 31% in Iowa just are not sustainable.  Easy money needs to find a home in something, and this time around farmland is one of them - long time readers will now the horde of investment money coming into this space via pension funds and the like.  [Jun 14, 2008: Bloomberg: Farmland Reaps Bonanza for TIAA] [Jun 5, 2008: NYTimes: Food is Gold, So Billions Invested in Farming] Good times for the farmer set - until one day it is not.

I eagerly await for signs of Ferrari dealerships in the Omaha, NE or Cedar Rapids, IA as a mark of a "top" in the farmland boom.  Party on Garth.   AP reports:

  • An Illinois farmer made so much money this year he made loan payments on one tractor a year in advance and exchanged some older ones for newer models. An Iowa farmer upgraded his combine and also paid off debt, while an elderly Oregon farmer poured into retirement funds a bundle of his $2 million take from a well-timed sale of much of his turf and equipment.
  • While much of America worries about the possibility of a double-dip recession, such stories of prosperity are cropping up as U.S. farmers enjoy their best run in decades, thanks to high prices for many crops, livestock and farmland and strong global demand for corn used in making ethanol.
  • Farm profits are expected to spike by 28 percent this year to $100.9 billion, and the amount of cash farms have available to pay bills also is expected to top $100 billion — the first time both measures have done so, according to the U.S. Department of Agriculture. All the while, crop sales are expected to pass the $200 billion mark for the first time in U.S. history, and double-digit increases are expected in livestock sales.  "We're just experiencing the best of times," said Bruce Johnson, an agricultural economist at the University of Nebraska in Lincoln. "It's a story to tell."
  • ........most of the talk about U.S. farming remains bullish, with analysts widely trumpeting "the new normal" in U.S. agriculture: Demand in China, India and other developing countries for U.S. agricultural exports — and hunger for corn for ethanol — has been keeping prices high and farming profitable.

[Nov 16, 2011: Farmland Boom (and Brewing Bubble) Continues as Midwest Land Jump 25%, Led by Nebraska's 40%]

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