There was a full crowd in attendance final Thursday night, April 15, on the KC Corridor in Cascade, Iowa. The occasion was the sale of 200 acres of farmland in close by Jones County. The attendees received to absorb the feelings typically generated from a public land public sale venue, whereas additionally having fun with a chilly beer, gentle drink or refreshment of selection. For the reason that sale solely took 20 minutes, some even joked about sticking round to play bingo afterward.
In a radio interview, the auctioneer mentioned the sale was the most important in his 44-year profession. He dropped the ultimate hammer at $18,800 per acre after quick and lively bidding which started at $8,500 per acre. An area lender was there representing a farm shopper who was ready to bid to $12,000 per acre, however they hardly had an opportunity to take a sip of espresso earlier than the bidding blew previous their limits.
The auctioneer credit a number of elements that contributed to this notable sale, together with sturdy grain costs, low rates of interest and a restricted provide of farmland obtainable on the market. The farm was owned by the identical household for a few years so this was a once-in-a-lifetime alternative for native landowners. The truth is, all of the 4 lively bidders have been from inside 3 miles of the farm. Maybe the most important issue for this explicit sale was the previous adage in actual property of location, location, location!
I can’t assist however assume of a lecture from one of my ag professors 20-some years in the past speaking about how agriculture is a cyclical enterprise. The truth is, you may determine 7 to 10-year cycles in commodity costs going again the final 50 years:
Satirically, it was 7 to eight years in the past when commodity costs, land values and money rents have been final setting new highs. It appears historical past could also be repeating itself and the ag business is poised for an additional bull market cycle.
In July of 2012 corn futures hit $8 and soybeans $17, and I keep in mind a retiring farmer saying: “Wow, this is a great way to go out, but I’m afraid we’re all going to pay for this in the end.”
He might have been proper as revenue margins have been razor sharp for a lot of farmers over the past 4 to 5 years. Simply this February, the front-page story of the Des Moines Register was about farm bankruptcies reaching 10-year highs. It is very important keep in mind what adopted $8 corn and $17 soybeans: rising prices for fertilizer and different crop inputs, equipment and land rents which have been all reluctant to come back again down as corn and soybean costs got here again all the way down to ranges of $3 corn and $8 soybeans only a 12 months in the past right now.
It appears all of the market elements are aligned to repeat one other bullish price cycle final fueled from the drought circumstances of 2012. This time the elements embrace tight international grain provides, continued sturdy international demand for our meals, gasoline and fiber, in addition to sturdy authorities assist. Nevertheless, there isn’t a doubt our business is just not proof against unknown black swan occasions which might influence these traits. Within the brief time period, it seems it’s time to buckle up as a result of the following two to a few years might present for fairly a experience in agriculture. This may generate each alternatives and challenges for producers as they attempt to handle this continued price volatility.