Market News & Headlines >> Are You Ready for Ag Ownership Shift?
The graying of American farmers is a well-documented trend, and one that actually has been prolonged by the several-year boom in ag commodity prices, which has kept some oldsters on the farm longer: Why sell or pass on the land to younger generations when you are enjoying the profits of a lifetime – and soaring land prices?
However, with prospects for a long-term return to more modest profits, a halt in rising cash rents and a slowing in the increase in land value, it may be time to take action regarding transfer of ownership.
This timing is occurring just as the prospect of interest rates rising is increasing. It's expected the Federal Reserve's bond-buying program will end later this year and interest rates could begin inching up in the second half of next year.
Any boost in interest rates implies an increase in capitalization rates as well, making farmland less attractive as an investment and reducing the leverage that farmers/landowners can use to expand. As land prices ease, the debt capacity utilization rate will increase from recent low levels even without additional borrowing. This could put the brakes on the growth of big farms.
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