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Nw Iowa | All above good posts. Market to market valuations have been talked about in ag for some time but as reformed said, pretty hard to put a hard value on any land unless you have certified appraisal and even that is looking back, market is looking ahead. A bond is pretty easy to value. With common sense which falling markets bring back, I think most operations will be just fine. I think unless we see a black swan that is on top of another problem we aren’t going to see major problems. The 80’s were cumulation of crazy lending practices , Russian grain embargo and crazy interest rates. Here I don’t think you could ever borrow over 50% in this run up and our land values have been more conservative as our area got hit hardest in the 80’s and still a lot of guys that remember it.
Edit. I also think difference on mark to market between bonds and land is that bonds are carried at full face value, land is generally loaned at 40 to 60% of purchase price and loan on books is valued at loan not value of land. So a 10 to 20% drop should not get too many in trouble. Young farmers that have FHA loans have bank holding a first and FMHA carrying the second. I understand that there is more to it than that but fact that land is never usually financed at 100% makes market much more solid. I believe history repeats itself, but right now I don’t see things falling apart, softening yes. Ag has to cycle like any business or farmers would bid the profit out of 8$ corn.
Edited by jdironman 3/9/2024 13:12
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State of Ag Banking
