One of the concerns at this time in the agricultural land market is the financial health of producers. US agricultural is in its sixth year of a downturn with overall net farm income for 2019 projected to be down 50% from 2013. Working capital has declined almost 75% since 2012 and inflation adjusted farm debt is at the highest levels since the 1980s. Low commodity prices coupled with rising costs have squeezed profits and working capital causing farmer buyers of land to be more cautious.
Farmers National Company is seeing a small increase in the number of farmland sales by financially stressed producers in some regions due to multiple years of reduced income. Some of these sales are sold quietly and not exposed to the marketplace to get top dollar. Other sales are coming from producers who are pro-actively liquidating a land asset to improve their balance sheet and cash flow. Farmers National Company is now handling an increasing number of land sales and receiverships for lenders.
Overall, US agriculture remains in solid financial condition despite weakening on a number of fronts. Debt to asset ratios are worsening, but remain below recent higher levels. The number of farm and ranch bankruptcies is increasing, but are far below what was experienced in the 1980s. Land values that have held up better than expected have supported the growing level of financing required for some producers.
As 2019 unfolds, the land market will remain on edge watching farm finances, weather, and trade issues. The outcome of these and other unknowns will guide which direction land values will move over the coming months.
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|