Of course, no one has any strong opinions on land prices...
But every market has different factors supporting prices. Can you make the case for your area, as to why prices have to correct, or have room to move?
Here, a lot of people are willing to pay a lot for the privilege to farm. Both husband and wife work full time to own a quarter of land with a few cows and enough modern equipment to farm half the county. As long as there are decent paying jobs here, these people will keep buying. Has been a net migration out in the past couple years, but hasn't affected land, these people are still buying. Steady supply of new farmers wanting to get in, at whatever scale they can manage.
Almost as many people consider a quarter section with a building site with a mountain view, horse pasture, some hunting/quading ground and some trees a much better bargain than a postage stamp lot with a view of more houses in Calgary or other close towns. As long as those folks continue to retire, or have good paying jobs, they will keep buying, the price difference between here and Calgary, indicates that Calgary could have a substantial correction before we would look expensive.
Even many of us real farmers have the opportunity to work to subsidize land payments. I wouldn't dream of subsidizing farming operations, or equipment purchases, but have spent most of my life working and putting it all towards land purchases. Have the option to do so as a plan B if need be, this will delay or avoid very many distress sales.
This area has never been about what a farmer can pay, or is willing to pay, so profitability of farmers or average age is somewhat irrelevant, but in recent years, the few remaining cattle farmers under 80 years old are finally upgrading equipment and expanding, even buying land. Grain has been very profitable for the past decade, if recent prices are the new low prices, then grain farming has a bright future here with our yields. Many farms are still diversified into both livestock and grain, so every acre can pay for itself.
Lease revenue, I have one quarter where the lease revenue nearly makes the payments, both interest and principle. That is the exception, not the reality for most of my land, but there are lots of quarters where the lease revenue far exceeds gross production revenue. And there is always the lottery of winning a new well ( in spite of what everyone says, it is almost always about the money).
So, by my logic, so long as the energy industry doesn't completely collapse, there is at very least strong support under this market to keep the bottom from falling out, or even keep it creeping up.
Most of the factors which would negatively affect values here, are bigger picture. Interest rates, energy prices, collapse of farmland prices elsewhere would have to drag us down, but perhaps not as far as pure farmland values would.
Farmland has never been affordable here, I'm looking at a quarter right now that is nearly 4 times what I paid for the first one, but it is no less affordable than that one was, at least by my math.
But every market has different factors supporting prices. Can you make the case for your area, as to why prices have to correct, or have room to move?
Here, a lot of people are willing to pay a lot for the privilege to farm. Both husband and wife work full time to own a quarter of land with a few cows and enough modern equipment to farm half the county. As long as there are decent paying jobs here, these people will keep buying. Has been a net migration out in the past couple years, but hasn't affected land, these people are still buying. Steady supply of new farmers wanting to get in, at whatever scale they can manage.
Almost as many people consider a quarter section with a building site with a mountain view, horse pasture, some hunting/quading ground and some trees a much better bargain than a postage stamp lot with a view of more houses in Calgary or other close towns. As long as those folks continue to retire, or have good paying jobs, they will keep buying, the price difference between here and Calgary, indicates that Calgary could have a substantial correction before we would look expensive.
Even many of us real farmers have the opportunity to work to subsidize land payments. I wouldn't dream of subsidizing farming operations, or equipment purchases, but have spent most of my life working and putting it all towards land purchases. Have the option to do so as a plan B if need be, this will delay or avoid very many distress sales.
This area has never been about what a farmer can pay, or is willing to pay, so profitability of farmers or average age is somewhat irrelevant, but in recent years, the few remaining cattle farmers under 80 years old are finally upgrading equipment and expanding, even buying land. Grain has been very profitable for the past decade, if recent prices are the new low prices, then grain farming has a bright future here with our yields. Many farms are still diversified into both livestock and grain, so every acre can pay for itself.
Lease revenue, I have one quarter where the lease revenue nearly makes the payments, both interest and principle. That is the exception, not the reality for most of my land, but there are lots of quarters where the lease revenue far exceeds gross production revenue. And there is always the lottery of winning a new well ( in spite of what everyone says, it is almost always about the money).
So, by my logic, so long as the energy industry doesn't completely collapse, there is at very least strong support under this market to keep the bottom from falling out, or even keep it creeping up.
Most of the factors which would negatively affect values here, are bigger picture. Interest rates, energy prices, collapse of farmland prices elsewhere would have to drag us down, but perhaps not as far as pure farmland values would.
Farmland has never been affordable here, I'm looking at a quarter right now that is nearly 4 times what I paid for the first one, but it is no less affordable than that one was, at least by my math.
Comment