Lay­offs rat­tle China’s work­force

Bloomberg Businessweek (North America) - - Contents - Alan Bjerga and Jeff Wil­son

Farm­ers Na­tional, which man­ages more than 5,000 farms and ranches in 24 states. Ris­ing in­ter­est rates could re­duce farm­land val­ues by as much as 15 per­cent within two years, he says. Ru­ral bankers are get­ting more bear­ish, ac­cord­ing to the Ru­ral Main­street In­dex cre­ated by Creighton Univer­sity from a sur­vey that mea­sures at­ti­tudes of lenders across 10 Mid­west­ern states. Its gauge of farm and ranch land prices sank to 28.8 in De­cem­ber, the 25th straight month below a growth-neu­tral rat­ing of 50.

Could land then be­come more af­ford­able for farm­ers think­ing of ex­pand­ing? No such luck. “Land prices are down very lit­tle rel­a­tive to the drop in farm in­come,” says Dan Kowal­ski, di­rec­tor of re­search at Cobank, a co­op­er­a­tive mem­ber of the Farm Credit Sys­tem in Green­wood Vil­lage, Colo. “As the liq­uid­ity sit­u­a­tion for farm­ers changes, buy­ing farm­land will be­come a more dif­fi­cult de­ci­sion.”

Be­cause of the fat years, farm­ers prob­a­bly won’t see the same kind of eco­nomic cri­sis they did in the 1980s, says Paul Pittman, chief ex­ec­u­tive of­fi­cer of West­min­ster, Colo.based Farm­land Part­ners, a real es­tate fund that owns about 108,000 acres across the U.S. Most are in bet­ter shape fi­nan­cially af­ter years of high prices, and the in­ter­est rate in­creases so far are rel­a­tively small.

For An­thony Bush, who farms more than 1,400 acres of corn, soy­beans, and wheat out­side Mount Gilead, Ohio, higher in­ter­est rates are just an­other sign that the mood is shift­ing. “I look for a pe­riod of pretty tough times,” says Bush. “I need to bor­row money in the spring to cover the costs I pay off in the fall, so when you’re buy­ing your seeds, your fer­til­izer, you have to take on your debt all at once.” Even with those in­creased costs, he ex­pects farm­ing to re­main vi­able. “If you want to stick in this busi­ness, you have to be an eter­nal op­ti­mist,” Bush says. “We may not have cheap in­ter­est rates. But we’ll still have to eat.”

The bot­tom line This year will test the met­tle of U.S. farm­ers as the boom that drove land val­ues and crop prices sky-high comes to an end.

Edited by Christo­pher Power Bloomberg.com

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