Tag Archives: cooling
U.S. Farmland Market Cooling Entering Key Auction Season
By Christine Stebbins CHICAGO, Sept 27 | Fri Sep 27, 2013 2:03pm EDT (Reuters) – The red-hot rush for U.S. grain land is cooling after years of record prices, but prime acreage is still attracting top dollar in the heart of the Corn Belt so far this fall, according to land auctioneers. “On higher quality land it’s been pretty strong steady, but on medium and lower quality land we’ve seen some pullback,” said Randy Hertz, CEO of Iowa-based Hertz Farm Management. “There’s a lot of uncertainty out here in terms of what the future holds.” The key season for U.S. farmland sales is October through December, when Midwest and Plains grain farmers are rolling in harvest cash and planning their taxes. Most economists and bankers say it is too early to tell if land values have peaked. “We’ve peaked for right now unless the grain markets rebound sharply, when it might change things and go the other direction. But right now I think is probably a leveling off period,” said Eric Mueller, an auctioneer and broker at Omaha-based Farmers National, the largest farm management company in the country. Recent farmland sales from Ohio to Nebraska have ranged from about $3,000 an acre up to $16,000 for top quality ground. While prices are strong the rate of gain has eased from 2012 when prices jumped 20 percent to 30 percent. “Interest rates are creeping up a little. But, ultimately, I think the biggest factor is grain. There’s still a lot of money out there, but buyers are going to be a little bit less aggressive with the grain markets coming down,” Mueller said. “The sentiment is holding in Nebraska and Iowa.” Corn prices are down 30 percent since last fall on the outlook for a record harvest. But corn revenues this year are still seen strong with higher yields after last year’s drought. “Frankly the last 10 years have been phenomenal. It’s off-the-chart good,” said Brent Gloy, an agricultural economist with Purdue University. “It looks like to me this is the first time we’ve seen some substantial headwinds in the market for a while.” Chicago Board of Trade December corn on March 1 was $5.57, but closed at $4.57 on Thursday. A year ago, the price was $6.20. “If it becomes obvious that corn prices are going to shake out below $4 in the $3 range, we’re at a peak,” Gloy said. “The lower commodity prices are hard to justify the really high land prices we’ve been seeing. If you take high quality farmland in Indiana, if you get much over $10,000 an acre, you’ve got to have cash rents over $300 an acre, in some cases $400 or $500. If corn prices are below $5, it’s going to be hard to pay those rents.” Bankers and economists watch farm land prices closely. Land represents 85 percent of farmer assets – and loan collateral. Federal Reserve banker surveys for the quarter ended in June cited lower rates of gain in land prices. At the same time, bankers cautioned farmers against chasing price dips with borrowed money, dreading another 1980s farm debt crash. “The difference with the 1980s is that 75 percent of land then had mortgages. Today, 25 percent does,” said Jeff Obrecht, an Iowa-based real estate broker with Farmers National. “That makes a big difference. We just don’t have the debt out there that we had. Part of that is lenders are requiring more. If you buy at $10,000 acre, you’re going to have to put $5,000 down.” Auctioneers said that, in recent weeks, more ‘no sales’ have been reported at Midwest auctions as buyers think through revenue, cash and borrowing fundamentals. “When I sold a piece a property two years ago for $14,600 we got there in less than 5 minutes,” said Bruce Huber of Hickory Point Bank in Decatur, Illinois. “Some of these auctions are taking longer, fewer bidders. You can just tell the enthusiasm for the higher prices seems to be wanting yet the prices are still there.” So as land auctions pick up starting in October, auctioneers are expecting some price resilience. “Farmers buy about 70 percent of the farms in the Midwest,” said Hertz. “They’ve got cash, there are record amounts of cash. That cash at a bank or short-term deposits doesn’t pay much – essentially, less than 1 percent. Compare that to a farm that can earn 3-4-5 percent.” (Reporting by Christine Stebbins.; Editing by Andre Grenon) Continue reading
Global Cooling On Carbon
Thursday, 18 April 2013 If you think gold’s recent swan dive was unnerving, spare a thought for those who bought carbon credits – that’s where the climate change has really happened. Gold has recouped some of its losses over the past two trading sessions, but it remains 26.9% below the all-time closing high of US$1,898.25 an ounce reached on 5 September 2011. It’s bad, it’s bad, you know it. Just ask John Paulson who reportedly lost US$1.5 billion of his personal wealth betting on the shiny metal (though it’s still a paper loss until he sells his holdings). Just ask the central banks, which according to Bloomberg, has lost US$560 billion this year. I betcha Paulson & Co. and the central banks would not be feeling all that bad — nay they would be laughing — that they didn’t buy into the emissions trading scheme business as well. For the price of carbon has not only fallen it has collapsed. It closed at US$3.61 last night, down 17% from the previous day for a total dive of…wait for it…92.9% from the US$50.66 high posted on 11 July 2008. Yeouch! As with many of the troubles that still plague the global economy, this too is made in Europe. Carbon prices fell after the European Parliament rejected the European Commission’s plan to backload – that is, take 900 million tonnes of carbon credits off market and return them when the region’s economy is stronger (in three years? five years? 10 years?). The rejection was for all the good of Europe. It’ll reduce costs for European businesses, especially the energy intensive ones, and it’ll lower European consumers’ living expenses, mainly energy bills. They need that with many national governments on an austerity crusade – reducing fiscal spending here and raising taxes there. Whatever works to keep the Eurozone economy working again. And once more, like any made in Europe predicament, it spells contagion…into Australia in particular. You can almost taste Ernest Miller Hemingway’s immortal words, “don’t ask for whom the bells toll, it tolls for thee”. Did I say you, I mean Julia and Wayne. For just as we Australians all, seemed to have warmed to Julia’s flip on the carbon tax, the international price has collapsed. Australian energy guzzlers are currently paying a fixed price of A$23 per tonne and by 2014/15 this will increase to A$25.40 — all the while when the international price is around US$3.60 (A$3.74). It comes as no surprise therefore that you hear Australian businesses – led by the Business Council of Australia and the Australian Industry Group – clamouring, “I’ll have what she’s having”. That’s tough for Wayne Swan who’ll be presenting the Budget to us Australians all in less than a month’s time. The last Budget predicts a carbon price of A$29 a tonne by 2015/16. This would put an extra A$6.7 billion in the government’s coffers. Financial markets see the carbon price at A$3.46 a tonne by July 2015. What happens to Wayne’s forecast revenue then? But this is still two years away. Unless a miracle happens, Labor would not be in government by then and it’ll be up to Tony to blame why the Budget remains in deficit on Labor. Continue reading
