Farmland headed for a bubble?

[hillhunter]

I'm not sure these prices can hold, however right now everyone seems to think that land is a much safer investment than anything else. Someone offered my uncle 2500 for his block of land. He told them to go find him another piece just like it for the same price and he would sell it.... Point being he knew they couldn't. Also there is still a lot of Big Old Money in the delta, most of them don't hesitate to buy up the neighbors farm if it comes up, economic or not and most of this land never hits the market because land owners know they already have a buyer ready if they ever want to sell. Some of these actually farm the ground, some just buy it to add to their investment. In todays world 2 million is nothing when you've got ten million in land equity next to it. I hate to see the fallout if the bubble does burst, but one thing for sure is that they will fall eventually... maybe not in our lifetime or maybe in 6 months, but everything is cyclic.

[dukluk]

Just a heads-up for anyone who may have inherited land in the past year....get an appraisal done on it, NOW....an appraisal, while land prices are currently high, will lock in a high cost basis, so that if you ever do sell it, hopefully for a higher price, you will only have to pay taxes on the difference....if you DON'T get an appraisal within 9 months of inheriting the land, the cost basis will revert back to whatever the deceased landowner paid for the land, which could put you in the poor house, or even worse, having to sell the land, just to pay the taxes.

[Deltamud77]

Heard first hand of a 4000 acre plus farm north of Clarksdale being bought by an out of country hedge fund for around $5000 per acre within the last couple of months.

[jwayne]

As of right now direct payment subsidies are not included in the 2012 farm bill.

So we will see....

[torch]

Heard first hand of a 4000 acre plus farm north of Clarksdale being bought by an out of country hedge fund for around $5000 per acre within the last couple of months.

Same folks buying land down here too.

[JMallard]

Hard to compare the current land market to the 80's. Most of that land speculation was done on borrowed money...very little of the land being bought at the price today is bought with borrowed money...don't get me wrong, we are loaning on it and will continue to do so, but the buyer is coming to the table very liquid and putting so much money down, it will be hard to have a collapse like we did. Also, we don't think the loss of direct payments will hurt that much, most farmers are ready for that, and the program that will replace the dp will be some kind of price insurance deal....it will work out.

There will be some kind of correction, always is, but to compare this to the 80s is inaccurate. So many more variables and goverment influence/crap then. This is really a true free market price escalation...

[torch]

I bet you see a correction then intrest rates jump double digits. All that has to happens is beans go back to 6.00 , cotton go to .30 and rice go to 4.00 and you will see land prices drop by over 60% and intrest rates jump to at least 10%

[SWAG]

Hard to compare the current land market to the 80's. Most of that land speculation was done on borrowed money...very little of the land being bought at the price today is bought with borrowed money...don't get me wrong, we are loaning on it and will continue to do so, but the buyer is coming to the table very liquid and putting so much money down, it will be hard to have a collapse like we did. Also, we don't think the loss of direct payments will hurt that much, most farmers are ready for that, and the program that will replace the dp will be some kind of price insurance deal....it will work out.

There will be some kind of correction, always is, but to compare this to the 80s is inaccurate. So many more variables and goverment influence/crap then. This is really a true free market price escalation...

I agree, it is pure supply/demand that has prices where they are right now.

[Click]

What happens when they pull those direct payment subsidies that pay the biggest portion of agriculture rent? Seems to me that government money is the biggest driver in ag land values in the delta. The Obamacrats aren't going to be fighting to keep subsidies in the budget like the democrats of the past, and republicans aren't likely to support them either.

The disappearance of direct payments will be made up in insurance programs.

[torch]

What happens when they pull those direct payment subsidies that pay the biggest portion of agriculture rent? Seems to me that government money is the biggest driver in ag land values in the delta. The Obamacrats aren't going to be fighting to keep subsidies in the budget like the democrats of the past, and republicans aren't likely to support them either.

The disappearance of direct payments will be made up in insurance programs.

Never understood a program that rewards farmers for failure

[huntersmky]

Group from Argentina bought that block and another 8000 acre block in Arkansas.

Heard first hand of a 4000 acre plus farm north of Clarksdale being bought by an out of country hedge fund for around $5000 per acre within the last couple of months.

Same folks buying land down here too.

[JMallard]

I bet you see a correction then intrest rates jump double digits. All that has to happens is beans go back to 6.00 , cotton go to .30 and rice go to 4.00 and you will see land prices drop by over 60% and intrest rates jump to at least 10%

If interest rates go to over 10%....our last worries will be "high priced" farm land. For IR to have an effect on land, it has to be leveraged....the percent of cropland that is leveraged right now is at a historical low. Farmers are carrying very little term debt. If prices go back to what we saw...10 years ago, that means inputs will go down as well, and things will keep ticking along....the diffence will be that farmers will have to use land as part of their borrowing base again.

The other thing is, actual farmers only own about 50% of the cultivated land....

[Deltamud77]

Group from Argentina bought that block and another 8000 acre block in Arkansas.

Heard first hand of a 4000 acre plus farm north of Clarksdale being bought by an out of country hedge fund for around $5000 per acre within the last couple of months.

Same folks buying land down here too.

Yep...word is that they are a group owned by or in partnership with George Soros.

[huntersmky]

yes sir, A good friend of mine specializes in agriculture sales and he told me that these guys are paying unbelievable amounts of money for land. Agreeing to keep the rent the same for 1 year and then they are jacking it up on the farmer by $100 an acre. They do improve the land to make it worth a little extra money, but not always the case. He said when they find a property they want, they buy it, hands down. all of these guys are from other countries, they find it a safe investment and expect a return from anywhere b/t 7-14%.

I predict it will be a bubble just like the housing the market. Farming is good right now, and the best it's been in some time - more than likely since 1999 - but prices were high this year and crops looked good. It will fall, just give it time.

[deltadukman]

George Soros would like nothing better than to wreck our economy. He's tied to several other broke economies and groups that are messing with ours.