What happens in the USA sooner or later happens in Canada! Land Values

[SASKFARMER3]

US land prices fall as weak crop prices sap farm incomes
US land prices approached a fourth year of unbroken decline, amid growing worries over the dent to farm incomes from weak prices, which for corn are below breakeven levels for many growers.

A farmland price index compiled by Creighton University from a survey of lenders came in at 39.3 points for October, down a modest 0.3 points for last month, but remaining well below the 50.0 level that indicates a neutral market.

The decline, which extended an unbroken run of price declines stretching back to December 2013, came amid worries farm finances prompted by current crop prices, particularly for growers renting land, so facing additional costs.

For farmers renting land, crop prices of $3.50-3.75 a bushel, a range which roughly covers the spread of Chicago futures prices out to next summer, are not covering costs for 45% of growers, Creighton's survey showed.

Only 2.4% of growers were achieving profits at that level.

'Below the breakeven by all means'

And given that many growers receive prices below futures – cash corn prices as monitored by Reuters ranged on Friday from a discount to December futures of $0.08 a bushel in Union City, Indiana to $0.45 a bushel in Lincoln Nebraska – profitability prospects may be even worse.

Fritz Kuhlmeier, chief executive of Citizens State Bank in Lena, Illinois, said: "Where can I find a spot price for corn of $3.50 a bushel or above today?

"Try $3.00 -3.20, which is below the breakeven by all means."

December futures were on Monday priced at $3.49 ¾ a bushel.

Default worries

The "weak farm income and low agriculture commodity prices" pose a threat to the viability of some farms, the survey showed.

A handful of bankers, some 9.5%, "expect farm loan foreclosures to pose the greatest threat to banking operations over the next five years," said Ernie Goss, the Creighton University economics professor in charge of the survey.

However, the survey also showed some recovery in the US farm equipment market, which came in with a reading of 29.3 – the highest in nearly three years, if still well below the 50.0 neutral level.

Association of Equipment Manufacturers data for September showed US sales of four wheel drive tractors, beloved by large arable growers, soaring 25% year on year to 214 units, to take the total for the first nine months of September to 1,501 vehicles, a rise of 2.1% year on year.

US combine harvested sales rose 6.0% to 478 units, taking the nine-month total to 2,956, down 3.5% year on year.

About last spring the USA farmer was starting to see issues with their lenders etc. Few BTOs in Different states declared bankruptcy. One was a huge guy in ND with more owing than his entire farm was worth the other a company in Illinois or Iowa which Case took over to get some money back.

36 bush wheat at 6 is 216 or below cost of production.
69 barley at 3 is 207 below cost of production.
39 canola at 11 is 429 but that has to pull the other two up to give you a break even year.

80 plus rents and 428000 dollar quarters and 3/4 of a million combines and drills and tractors is not sustainable.

Any one do their fall review and how happy was your lender.

Its only one year but if this continues into 2019 she is over.

[farmaholic]

"Its only one year but if this continues into 2019 she is over."

NEVER!!! There's only one way for land prices to go...UP

[bucket]

You would never know there is a problem around here....land bidded so stupid I should sell ....considering I buy a lottery ticket every week I honestly don't know what's wrong with me to keep doing this....kids I guess....

[Hopalong]

If past is any indication, farm equipment sales were often first to recover from low crop prices.
Improved productivity and efficiency then created more demand for land, either to rent or own.
Farm bill payments and subsidies may be on chopping block if Trump administration is able to follow through on promised tax reform. Latest Morneau fortunes could mean same thing here.

[jamesb]

It comes down to access to credit. In the US and in Canada the ability to access credit has never been easier in recent years. The banks will carry on with this until the farmers ratio's get out of whack and then the money will be shut off. Those with poor debt/ asset, working capital and lack of a business plan will find themselves on the outside.

[SASKFARMER3]

We have a few quarters about 30 miles or more away and the value has increased to a nice number. We don't farm them because i am not traveling that far for a few fields. Its good land in a lentil area and land prices are going up over their. Not like our area but almost.

We have discussed whats to do and feel if it hits this winter the price we want it will be sold.

Cash is king then we will sit and earn a little interest if our guy keeps doing what he did over 8% but thats a game also.

Then when the crash hits and yes it will land will be bought at home.

I realize it won't go back to 75000 level but if history repeats it will be 150 to 200 and thats a buy.

I posted a chart once on every dip in land and buy using the same math thats where it will happen again.

So a buy at the next dip.

I agree easy credit is the problem on most loans and other problem is the mentality of Oh your payments now are 89 thousand a year so rent a few more quarters and keep playing the BTO.

Yea the guy in ND and another in Illinois did the same.

[Partners]

Local guys offering more than land owners were dreaming of.
No slow down here.
TO many bigger farms with even bigger egos.

[burnt]

You would never know there is a problem around here....land bidded so stupid I should sell ....considering I buy a lottery ticket every week I honestly don't know what's wrong with me to keep doing this....kids I guess....

A lot of us likely lean on the same reason as you gave, "kids I guess."

Which leads to the next question - what are we actually leaving to our kids if they do take over? Taking into consideration the real decade-over-decade decline in commodity values, the social situation mentioned elsewhere, the move toward globalism?

Please prove to me that I'm chicken little...

[Bowerpower]

High land I can stomach I suppose. Somebody is going to buy it. Add to the operation and try to pay it for for the next generation. Bought some expensive..... dirt but it was close to home. land is always too expensive, but will values come down, doubtful in my area but maybe. At least land is an asset that holds value relative to everything else. It's the new iron that doesn't make any sense to me.

[brs]

I hear all the time land prices follow the price of a tractor and a house in the city. Only sad part about that is a tractor these days can go over probably 4 to 5 times the land base.

[newguy]

Last time things went to he'll in farming no one wanted to own farmland except farmers.So buyers were limited and prices dropped dramatically
If things go bad now lots of people with tons of money see the long term value of owning land.so price will have a pretty good cushion from dropping too far.So if you waiting to scoop up cheap land to increase your personal wealth again think your dreaming.

[quadtrac]

I thought land would level off too... wrong.

Latest in our area is same as last sale but not nearly as good of land. So in other words higher than ever.
Lots of built of cash on many farms. Nothing to do with investors.

[farmaholic]

A message to those who rent land from speculators/investors. ....you don't have to make it worth their while!!!! Quit tripping over each other, or worse yet, yourselves and don't give them a ROI (yearly rent) that makes owning farmland without the hope of simple appreciation(how much could possibly be left?) worth while owning. If buying on price increase speculation only. ....someone will end up paying more for farmland than it's worth!

So instead of being a tenant the rest of your farming career....maybe you can be a landowner instead!

When you make an "investment", do you pay more for it than it's worth? Ask yourself how much more appreciation is left in the "Sask" farmland market? I think the fat lady is belting out the last few bars and I don't know if there's an encore...and if there is....one of these times there won't be.....but keep paying rents that makes it worthwhile for others to own the asset you should!

Sorry if I offended anyone...but think about it for a second.

[newguy]

Lots of excess cash looking for somewhere to go.Land or food production where the air and soil is relatively still clean is a good long term investment

[sumdumguy]

There were lots of good investments but hindsight is 20-20. In about 1990, I read an article that predicted cottage property to skyrocket because all the baby boomers were going to retire in the next 20-30 years. Truer words were never spoken. Good lake-front property ten timesed itself easily on the lakes around here-without any worries, no crops to seed, no cows to feed. Today, lakefront is an obscene price. That's only one investment, small houses in cities too. You could buy them for around $30,000 along Dewdney Ave. fifteen years ago. They went straight up in last ten years and are worth even more demolished. Some new lots in Regina are $250,000-just 50 feet of lot. I was offered a trailer park on a quarter of land in 1994 for $300,000, but not great land and the trailerpark looked like work, I couldn't see the forest for the trees, now worth many, many millions. Moral of the story - look outside the box.