Does anyone here actually own any farmland?? I am curious to know how difficult it is for a farm owner to obtain a loan to keep the business going. For an individual who has the capital to lend, is this a worthwhile investment to make?? Just curious, something i have been thinking about lately as i am in the mid west and always wonder about how farmers are doing.
Farmland is "insanely" expensive now. Most the small guys cashed out and sold to the big ag companies. http://farmweeknow.com/story-farmland-prices-possibly-poised-correction-0-100269 You should have been buying in the 90's when it seemed like they were giving land away. Now it's like paying $700 a share for AAPL. This chart might put things in perspective: Due to it's high prices, many are going into shared leases, but again, it's the lack of value that is a big concern.
Elliott Wavers would think it's at a long-term peak with apparent bearish grain fundamentals and interest rate expectations. :eek:
If the poster is asking about lending money to farmers to buy land rather than buying the land himself, I don't know if there would be much demand for investor > farmer loans. In addition the headwinds of record farm income and record low interest rates, you'd be competing against well-established local banks and los federales via the Farm Credit System. http://en.wikipedia.org/wiki/Farm_Credit_System The collateral's not going anywhere, but I think the returns would be quite low.
http://www.fsa.usda.gov/FSA/webapp?area=home&subject=fmlp&topic=bfl USDA young farmer loans are an interesting, prices are probably a little toppy on land but value remains in certain areas of the country. I live in an area with a lot of energy activity specifically fracking and the govt is paying people to sell their water rights forever. The real long term issue is water.
Thanks all for the responses. I was more talking about lending money to farmers so they could maintain their farms, like buying crops etc.., and all the things that it takes to maintain a farm. I think i read somewhere that farmers are always looking for opportunities for short term loans because there are times when the environment is really good to grow crops, and maybe farmers take that opportunity to grow more things. Would be interesting to hear from someone that actually owns as well.
I think what you're referring to is an operating loan. Loans of this type may be relatively short term in nature (less than a year) because you're lending money for farm inputs and receiving payment at or after harvest when the crop is sold. Here are some rates to give you and idea about prospective returns: http://www.e-farmcredit.com/TodaysRates/FarmRates/tabid/243/Default.aspx I'm a farmland owner in the sense that I will inherit some eventually. The land is currently being farmed by brother A. Brother B, who has money coming out of his ears, looked into the possibility of lending A money for operating and/or land loans a couple of years ago. He passed because the returns were so poor. If you're a profitable farmer with a decent balance sheet, you can get very low interest rates today. As mentioned earlier, the govt is involved in stabilizing/subsidizing the farm credit system and the big ag equipment companies also have their own financing arms.
Exactly Brighton, this is what i was asking about. So from the looks of things, doesnt seem all that profitable to lend money. And sounds like there are already ways out there like gov't programs to help farmers obtain money for these operating loans.