Source: Farmers National Co. news release
B.C., A.C., and Beyond
Foremost and more important than anything else, Covid-19 is a human health crisis unfolding around the world. Controlling the pandemic and its effects on people is the prime goal. Our hearts go out to those affected by the virus and the health care workers on the front line of the human challenge.
Thinking beyond Covid in the land market is further down the road and secondary to the human health challenges. May we all be safe and the time for family and friends to reunite be around the corner.
B.C. (Before Covid-19) US agriculture was gaining a bit of optimism coming off a difficult year in many sectors. Trade deals were coming into place and grain prices had a hint of getting better. The market for good cropland was stable to slightly stronger in many areas as interest rates remained low and demand was adequate for the supply of land for sale. Recreational land had good demand as the general economy and the overall wealth of individuals was strong.
A.C. (After Covid-19) has brought catastrophic disruption to the world economy including most aspects of agriculture. Dairy producers saw an immediate drop in fluid milk when schools were closed. Livestock producers who sold directly to restaurants or farmers markets saw their prime marketing channel dry up overnight. Corn producers saw the bottom drop out of ethanol usage at the institution of stay at home rules.
Beyond the Covid outbreak is too soon to really know how everything will play out. At this time, no one knows how long the world-wide disruption of commerce will last. The ensuing rise in unemployment and the resulting recession are in the very beginning stages.
The on-going effects on food and fiber demand and distribution is not fully known other than there are huge challenges for labor dependent fruit, vegetable, and livestock producers along with the processing and distribution industries. Traditional commodity producers will face challenges of a different type, but planting will happen this spring despite uncertainty surrounding prices and future support.
In the agricultural land market, it is also too soon to fully comprehend the Beyond Covid effects. Land is a long-term investment for most and that is what it takes to look beyond today’s challenges. For some, investing in ag land will be a safe haven for the current times and also a long-term hedge.
Some in the investor class may turn back to financial markets to invest there at lower prices while others will invest in the sustainability of land and food. The average land buyer who has resources may invest in recreational land for a place in the country. Generational transfer of land will continue as always, but inheritors will decide to either hold onto the land for the time being or sell into the market right away to generate cash. Farmers will still be buyers of land if they have the financial standing to do so.
But, and it is a big “but”, we don’t really know how everything will play out and how agricultural incomes will be affected.