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Are Ag's Best Years Behind Us?

November 15, 2013
Iowa Sunset Elevator010

Now with corn prices at about half of 2012 prices, net farm incomes will take a hit in 2014. But one lender says things aren't doom-and-gloom just yet.

Low interest rates, strong demand and high commodity prices have been good to many sectors of farming in the last few years. But economists with the American Farm Bureau say it's possible ag's best years may be behind it.

The Billings Gazette reports AFB economist Bob Young made those comments speaking at Montana Farm Bureau's annual meeting.

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He says growth for U.S. ag has been unprecedented. with farm income growing the last three years. However, young says he expects ethanol demand to remain steady, interest rates will have to rise at some point, and he expects growing demand from China to eventually slow, which makes for a more moderate picture of agriculture.

2014 Outlook

Now with corn prices at about half of 2012 prices, net farm incomes will take a hit in 2014. But one lender says things aren't doom-and-gloom just yet.

"We've been at record, record levels," says Doug Stark, CEO of Farm Credit Services of America. "And so coming off 20% of an all-time record of net farm income is still going to put us at nice levels of net farm income. Now that's going to shift a little bit, you know. Some of that's going to go from the grain sector where it has been, back into that livestock segment that has really been having more challenges recently anyway."

Stark says agriculture still has a lot of cash flow to absorb--some of those lower prices. But he says it's never too early to start looking at 2015.

"Now is the perfect time to make sure you've got an appropriate amount of leverage against your real estate assets," Stark says. "We've got interest rates at all-time lows, so you can lock in some really long-term fixed-rate rates and preserve that working capitol. You can take a little of the equity out of your land to preserve that working capitol to help you through tougher times or to take advantage of opportunities going forward. So you have that, and then I think producers really have to watch their cost of production."

Stark says farmland is still a premium, so we won't see land prices retreat off those highs just yet. He says it will take a second year of marginal income before we see a correction.

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RELATED TOPICS: Marketing, Economy, AgDay Show

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