Land value outlooks vary widely
If recent numbers are any indication, there's not a lot of agreement about where farm land values are headed.
A recent Agriculture.com poll shows a fairly even split on the topic; 25% of those responding say prices will continue to move higher, while 29% say they're hitting a plateau now. An identical number to that latter group says it's a "bubble about to pop." Bringing up the rear, 17% say current signals make it too hard to tell where values are headed.
"I'm no economist, but I think it's going to keep going up," says Agriculture.com Farm Business Talk member cowfarmer. "Outside investment is going to stay strong for a while until things turn around in the overall economy, and I don't see that happening soon."
That's one side of the argument. Still, others say a plateau is inevitable, but one that won't necessarily eventually lead to a downturn. At least not anytime soon, adds Farm Business Talk member kraft-t.
"Historically, those who think that land is too high seldom buy any. They thought it was too high at $500, at $1000, at $2000, At $5000 and at $8000. Some day they will be right but they will not own any unless they inherit it," kraft-t adds. "I think it may be at a plateau for now but I wouldn't bet much on a reversal. Land is still selling very well as somebody must want it."
Other factors in the ag sector could dictate what happens to prices, and that adds a lot of uncertainty that lead some to believe the market may be on thinner ice.
"I have mixed feelings. Scared to buy and scared not to buy. Do I miss the boat at these prices? Or do I wait for another inversion like the 80s? Only time will tell," says Farm Business Talk member nwobcw. "If I knew the future of ethanol, I could better make a decision."
Adds fellow Farm Business Talk member idalivered: "I've talked to a couple investors who feel this is getting unsustainable. This attitude slowly takes willing buyers away to other investments."
Regardless of the direction of prices, though, there are things you can do to continue participating in the land market but protect yourself from a potential bubble bursting, according to Virginia Tech University Agricultural Economist Emeritus David Kohl.
- Ask yourself "Has my business been profitable?" If so, you're okay to continue seeking more land.
- "Lenders are going to want to see equity at 50%. Sometimes, you may need help from a friend, FSA, or somebody else," Kohl says.
- Keep some cash back as a "financial shock absorber," Kohl says. "Also keep some around for opportunity. You give up some returns, but sometimes you've got to keep some cash back to be able to take advantage of some opportunities. Life is about timing and opportunity," he adds.