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Veteran Advisor

KC Fed - Ho Hum

"Farm real estate markets in the Tenth District remained relatively stable in the fourth quarter of 2017. The stability in farmland values was due, in part, to fewer sales, and a majority of bankers expect values to remain steady in 2018. Farm income in the fourth quarter continued to decline, and credit conditions remained weak, but the pace of deterioration has continued to slow. The relative strength of farmland values has provided support for farm finances despite the ongoing pressure of low agricultural commodity prices on farm income.
Read the latest issue of the Agricultural Credit Survey. For additional information on the agricultural economy visit kansascityfed.org/research/agriculture."

 

Income going down, farmland values staying the same?  Well, OK.  What is that telling us?  That the farmers who can afford land will continue to pay up but maybe there are fewer who feel they can make it with these prices?

 

Sounds like the KC Fed is saying bankers are going to look at your loan request more closely but the equity in land will help you out.  Does that mean that if land values slip the banker is going to pull the plug on your operating loan?  This seems to me to be slippery slope business - can cash flow service the amount of loan your land value will support?  I don't know.  What do you Kansans say about land values, operating loans and cash flow?  Does it work?

 

 

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2 Replies
Veteran Advisor

Re: KC Fed - Ho Hum

Chicago says it's area farm land values are up 1%.

 

"

Midwest Farmland Values Up Slightly in 2017
by David B. Oppedahl

According to the most recent AgLetter, Seventh District farmland values in the fourth quarter of 2017 were 1 percent higher than a year ago. Values for “good” agricultural land in the fourth quarter of 2017 were overall the same as in the third quarter. Read more"

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Honored Advisor

Re: KC Fed - Ho Hum

Income going down, farmland values staying the same?  Well, OK.  What is that telling us?  That the farmers who can afford land will continue to pay up but maybe there are fewer who feel they can make it with these prices?

These statistics tell us about the recent past...... They tell us nothing about the future so the second question is not addressed... would only be a personal prognostication.

  Who buys land is never as important as how many would like to....  

 

This seems to me to be slippery slope business - can cash flow service the amount of loan your land value will support?

Great question and is always important.  Where the cash flow statement becomes very important..... the direct link between grain prices and land prices...   For most farms addressing this question is survival.... survival of growth.  

History says growth is pivotal to survive generational change.  But survival requires managed cash flow 

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