I just completed my 23rd year teaching at the Graduate School of Banking at Colorado. Over 400 bankers were in attendance in Boulder, the heartland of legalized marijuana, which tends to be slightly socially liberal.
Utilizing anonymous online polling in my classes, participants were asked how farm real estate value in their respective regions has changed in the past year. Nearly 30% of participants indicated values had increased by more than 10%, while the largest percentage, 64%, responded there had been between a 0% and 9% increase. The remaining 8% indicated land values were slightly declining in their region.
I overheard hallway talk and informal discussion centered on when and how much farm land values would eventually decline. Again, polling discovered some interesting perspectives from the bankers. Approximately 60% of participants felt farm land values would decline from their peak values by 10-32% in their region. Half of the remaining bankers and regulators in the class expected the decline to be over 32%; while the remaining half were of the mindset that the values would have a slight decline of 1-9% or remain stable and not decline at all.
This polling spurred much discussion in class and thru the hallways between classes. Some from Nebraska, Kansas and even Iowa indicated that marginal farm ground value was starting to decline as commodity prices have dropped recently. Others stated that older producers who made more money in the last five years than they had made in their lifetimes were discussing selling land. Still others revealed that some investors who were aggressive in the farm land market are now becoming more selective and less active.
The Dakotas and the states in close proximity are still red-hot concerning farm real estate values because gas, oil, minerals, and substantial cash are keeping a premium on farmland.
Additional perspectives from bankers
- When asked to describe their agricultural portfolio, more than 40% of the bankers polled indicated that producers are not borrowing as much money recently.
- 25% of the bankers indicated that farmers are spending much more on family living and dividends withdrawals.
- Over 40% of the bankers have observed a widening gap in business profitability between the top tier of farms versus the bottom tier. One banker stated that some producers get it, while some do not.
- It was encouraging to see that over 40% of the bankers see their customers have stronger financial records and a better understanding of finance than they have in the past.