Archive for September, 2009

GLOBAL OUTLOOK ON FARMLAND AS AN INVESTMENT

Tuesday, September 29th, 2009
Many of the articles we post deal with the farmland market in the cornbelt states.  However, it is also important to get the views from outside of the Midwest and even outside of the U.S.  A recent Reuters article take a look at the investment of farmland and where it may be headed in the future.  The author, who spoke with various investors and farm operators throughout Canada, speculates that as the demand for high-protein diets increases world-wide, that the demand for farmland will continue to grow.

This is not the first time we have read this speculation on farmland being a good long-term investment.  What is your opinion?  Will worldwide demand for corn, soybeans, etc. continue to grow, bringing the demand for farmland (and farmland prices) along for the ride?  Let us know at eric@loranda.com.

Read the full article, here

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A PIONEER IN AGRICULTURE HAS PASSED AWAY…

Tuesday, September 22nd, 2009

I would be remiss if I did not mention the passing of Norman Borlaug last week.  In case the name is not familiar, Borlaug was dedicated to using science to combat world hunger. It’s been estimated that the techniques he implemented to improve wheat yields have saved over 1 billion people from starving in Asia, Africa, and South America.

Borlaug, a Midwesterner, won the Nobel Peace Prize in 1970 and created the World Food Prize. He’s been widely credited as the father of the original “Green Revolution”.  Though controversial in some circles – he advocated biotechnology and the crucial role he saw for it in feeding and enhancing the nutrition of those still in tenuous food security situations - everyone involved in agricultural production and consumption owes a debt of gratitude to this man.

To learn more about his accomplishments, visit this web site: Norman Borlaug, or simply Google his name.  Feel free to share your thoughts by emailing us – loranda@loranda.com

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THE EASY (BORROWED) MONEY IN AG IN GONE

Tuesday, September 15th, 2009

It is always interesting to watch the expansion and contraction of a marketplace.  For example, when corn prices are high, producers are incented to produce more corn because of the higher prices, which in turn leads to lower corn prices as more supply becomes available.  Sure, there is always a lag time between expansion and contraction, but a true market will generally work in this manner every time.

The same can be said in the agricultural lending market.  And in 2008, many ag lenders (and farm producers) got their full dose of “butterflies” from the roller-coaster ride of the credit markets – and the fact is that a good deal of money was at more risk had been than previously envisioned.  That memorable ride has translated into a tougher lending environment in 2009, and as we move into 2010.  DTN Editor, Macia Zarley Taylor, recently wrote a column describing the state of affairs in ag lending.  Given the strong overall health of the ag sector, the report may surprise you.  However, the signs are clear that if you intend to borrow money, now is the time to get your financial house in order.  To read the article, click here.

What’s your take – are people paying attention to these types of reports/warnings?  Is your lender preparing for a period of economic stress by tightening loan standards, and more specifically pricing risk?  Let me know by writing me at doug@loranda.com.

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A LOOK AT LAND PRICES & CREDIT AS WE HEAD INTO FALL

Tuesday, September 8th, 2009
In its recently released Ag Letter, the Federal Reserve Bank of Chicago took a look back at farmland prices from the second quarter and where they may be headed as we progress towards harvest time.  While values as a whole declined across the 7th District (3% decline form the second quarter 2008), the value of good farmland remained stable.  Looking forward, the  majority of the lenders that the author spoke with predicted that farmland values would remain stable in the third quarter as farmers gear up for what should be a bountiful harvest in most areas.  The USDA is predicting the second largest corn crop and the largest bean crop in history…that is if we can avoid an early frost.

The author describes that many Ag lenders are experiencing some of the same problems that other sectors of the economy are going through.  According to the lenders that were polled, loan repayment rates were down and renewals and extensions rose from the same time period in 2008.

To read the entire Ag Letter article, click here.

Does the decrease in land values correspond with what you have seen at recent sales?  What are crop yields expected to be in your area?  Let us know at eric@loranda.com

Source: Federal Reserve Bank of Chicago

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TOUGH ECONOMIC CONDITIONS EXTENDING TO THE FARM?

Tuesday, September 1st, 2009

The economic recession that has gripped this country, and the world, has been well publicized in the media.  Daily (if not hourly) updates on unemployment numbers, home sales, and bank failures can be seen everywhere.  In addition, we are inundated with press reports and news briefings on what the government has been doing to help “solve” the problems of the financial, insurance, and automotive industries.

One industry that had been notably absent from the gloom and doom discussions is agriculture.  Until now…  On August 28th, the Wall Street Journal wrote an article that described some of the deteriorating conditions in the countryside (Financial Troubles on the Farm).  Not all commodities have been affected the same.  Dairy and hog producers are having some of the worst problems at the present, while sugar producers expect a record year.  Grain farmers will soon realize how much lower grain prices have impacted their bottom lines, and in some cases it may not be pretty.

The experts in Washington say that the recession will soon be over.  Let’s hope that the agricultural sector is included in this recovery.  Stable input costs, stable commodity prices, and stable land values will be the most notable signs that the countryside is back on its feet.

Send your thoughts to loranda@loranda.com

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