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Is This Farm Boom Different?!

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October 22nd, 2012

The Kansas City Federal Reserve just released an issue of their Main Street Economist report that summarized their 2012 Agricultural Symposium held in July.  We had previously done a quick post on this, but the latest issue does an extremely good job of summarizing the data presented at the Symposium.

History does seem to repeat itself and based on the data from the symposium, there is a very good chance that at some point, the farm boom will correct itself.  Most likely it will happen to the larger more leveraged farmers and perhaps livestock operators who have had several bad profit years.  Although most farmers have record liquidity now, there are more farmers (as a percentage) that are highly leveraged than there were in the early 1980s right before the correction to that boom.

The confluence of record low interest rates and high cash rents have led to the current increase in farmland values, however, the increase in these values is increasing at a higher rate than cash rents.  This may not be sustainable.

I would highly recommend reading the six page report.

 

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).

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    Photo of 140 bpa wheat near Walla Walla pic.twitter.com/YsA2wPt1iH

    24 hours ago

    Corn does well in Washington state. 55 at night 95 during the day plus irrigation 2 days ago

    If average cash rents drop $50 this fall and cash return is 2% equals drop in average land values of $2,500. We shall see. 3 days ago

    2 years ago corn + beans + wheat was almost $40. Now it is under $20. 3 days ago

    Great time with @MRRChip today on Market Rally talking about the new farm bill. 4 days ago

    Drove over 2,000 miles in last 12 days. Saw a lot of good looking corn. Beans not so much 6 days ago

    When you drive through Minnesota, South Dakota and Iowa this time of year you see a lot of corn and beans and not much else 2 weeks ago

    Possible another reason for high US corn yield estimates is acres switched to beans were lower yield corn acres 2 weeks ago

    Don't understand why nobody claims the USDA manipulates the data when the report is bullish 2 weeks ago

    USDA pegged lower corn production but if yields trends continue this will quickly change to production increase. 2 weeks ago