Most farmers and ranchers know the ag economy works in cycles. One of the most reliable of these cycles is the 30-year cycle, and Ron Stock, co-owner and CEO at Stock Realty & Auction Co, notes there have been about seven of these cycles so far. Now we're in the eighth one.
"The last cycle, the ground dropped drastically in the first part of the '80s and stayed at that low price for about eight years, and slowly started to hedge up," Stock says. "This time, land has gone down a little bit, and I'm predicting this is going to be a short-lived down cycle."
Ron Stock, co-owner and CEO at Stock Realty & Auction Co.
One reason is because, in today's digital age, the economy works much faster than it did 30 years ago — and that includes the electronic transfer of money. "We're wiring a lot more money electronically. The world is moving a lot faster," Stock says. "The boards of trade are transferring electronically now more than 30 years ago, and the world is communicating better. There's a lot more trade happening out there."
However, what will ultimately determine how long the downtrend lasts is the price of corn. "When farmers get used to the new norm in corn prices, I think this land is going to be very stable, and I think it's going to be something good to own," Stock says. "It all depends on the price of corn."
Recent increases in corn and soybean exports have also helped stabilize and increase prices.
Renewable Fuel Standard contribution?
There's also been some optimism in the market amid reports in late February of a deal between Carl Icahn, special adviser on regulation to President Donald Trump, and the Renewable Fuels Association that would revamp the Renewable Fuel Standard (RFS). According to reports from national news outlets, the deal would shift the point of obligation (the entity responsible for meeting blending quotas under the RFS) from refiners to blenders, and the RFA has agreed to support the deal in return for a pledge for a waiver allowing the sale of E15 — 15% ethanol blends — year-round.
"If the mandate goes through, the market is really going to stabilize fast," says Stock.
Meanwhile, interest rates haven't increased into the double digits like they did in the early 1980s, although some have suggested the Federal Reserve will announce an increase in interest rates this spring.
In addition, many farmers are in better shape than they were in the 1980s, having taken advantage of higher corn prices in previous years to pay off debt. "The producers of this cycle are in a lot better financial position than the last cycle. The last down cycle, there were few farmers that had land paid for and were in a good position. This time, there are few farmers that are not in a stable position," Stock says. "The banks are a lot more stable now, a lot of the bankers still remember the early '80s, and they've taken measures not to repeat it. Financial banks and institutions have already played pretty conservatively."
Ron Stock contributed to this report.
Stock is a licensed real estate broker and has been in business with his brother, Mark, for 32 years. He is licensed in Nebraska, Kansas, Oklahoma, Colorado, South Dakota, Iowa, Minnesota and Missouri. He can be reached at 402-649-3705.