Peak land markets don’t deter beginners | TSLN.com

Peak land markets don’t deter beginners

Elizabeth Williams

INDIANOLA, IA (DTN) – Mark Ruff of Circleville, OH, was in elementary school when his parents quit their town jobs to start farming. Unfortunately, the year was 1979-80, just months before the nation’s farmland prices hit a record that would stand for 30 years. Like thousands of others from a lost generation of farmers, the Ruffs were buffeted by plunging farm incomes, 20 percent interest rates and a 50 percent drop in land values. They exited the full-time business four years later.

When Ruff and his wife Marcia started farming on their own 12 years ago without family help, they knew they needed to take steps to avoid becoming a casualty of the downturns in agriculture. They made a point to grow about 200 acres a year, avoid rental wars and keep leased land as tidy as if it were their own. They now farm 3,000 acres, but don’t yet own one acre of ground. The upside is that by keeping overhead costs low, “we’re confident we can do well in a low-margin environment,” Ruff said.

American agriculture stands to register what may be the most profitable year in crop production in U.S. history this season, after a string of bumper years since 2006. Prosperity has attracted new entrants back into the business, but young farmers are especially vulnerable should agriculture suffer another acute financial shock. When the Kansas City Federal Reserve stress-tested Midwest farms for a 30 percent drop in income and a hike in operating credit to 8.5 percent from today’s artificially low rates, more than half of farm borrowers under the age of 35 would suddenly plummet into bank regulators’ “severely stressed” category, Economist Brian Briggeman found. That’s largely because they lacked the profit margins and the reserves to weather a financial storm.

In this first of a two-part series on the Young and the Landless, DTN will examine how young farmers are acquiring assets so as not to overload themselves with debt. The second article in the series will look at how to avoid repeating history if these good times don’t last.

INDIANOLA, IA (DTN) – Mark Ruff of Circleville, OH, was in elementary school when his parents quit their town jobs to start farming. Unfortunately, the year was 1979-80, just months before the nation’s farmland prices hit a record that would stand for 30 years. Like thousands of others from a lost generation of farmers, the Ruffs were buffeted by plunging farm incomes, 20 percent interest rates and a 50 percent drop in land values. They exited the full-time business four years later.

When Ruff and his wife Marcia started farming on their own 12 years ago without family help, they knew they needed to take steps to avoid becoming a casualty of the downturns in agriculture. They made a point to grow about 200 acres a year, avoid rental wars and keep leased land as tidy as if it were their own. They now farm 3,000 acres, but don’t yet own one acre of ground. The upside is that by keeping overhead costs low, “we’re confident we can do well in a low-margin environment,” Ruff said.

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American agriculture stands to register what may be the most profitable year in crop production in U.S. history this season, after a string of bumper years since 2006. Prosperity has attracted new entrants back into the business, but young farmers are especially vulnerable should agriculture suffer another acute financial shock. When the Kansas City Federal Reserve stress-tested Midwest farms for a 30 percent drop in income and a hike in operating credit to 8.5 percent from today’s artificially low rates, more than half of farm borrowers under the age of 35 would suddenly plummet into bank regulators’ “severely stressed” category, Economist Brian Briggeman found. That’s largely because they lacked the profit margins and the reserves to weather a financial storm.

In this first of a two-part series on the Young and the Landless, DTN will examine how young farmers are acquiring assets so as not to overload themselves with debt. The second article in the series will look at how to avoid repeating history if these good times don’t last.

INDIANOLA, IA (DTN) – Mark Ruff of Circleville, OH, was in elementary school when his parents quit their town jobs to start farming. Unfortunately, the year was 1979-80, just months before the nation’s farmland prices hit a record that would stand for 30 years. Like thousands of others from a lost generation of farmers, the Ruffs were buffeted by plunging farm incomes, 20 percent interest rates and a 50 percent drop in land values. They exited the full-time business four years later.

When Ruff and his wife Marcia started farming on their own 12 years ago without family help, they knew they needed to take steps to avoid becoming a casualty of the downturns in agriculture. They made a point to grow about 200 acres a year, avoid rental wars and keep leased land as tidy as if it were their own. They now farm 3,000 acres, but don’t yet own one acre of ground. The upside is that by keeping overhead costs low, “we’re confident we can do well in a low-margin environment,” Ruff said.

American agriculture stands to register what may be the most profitable year in crop production in U.S. history this season, after a string of bumper years since 2006. Prosperity has attracted new entrants back into the business, but young farmers are especially vulnerable should agriculture suffer another acute financial shock. When the Kansas City Federal Reserve stress-tested Midwest farms for a 30 percent drop in income and a hike in operating credit to 8.5 percent from today’s artificially low rates, more than half of farm borrowers under the age of 35 would suddenly plummet into bank regulators’ “severely stressed” category, Economist Brian Briggeman found. That’s largely because they lacked the profit margins and the reserves to weather a financial storm.

In this first of a two-part series on the Young and the Landless, DTN will examine how young farmers are acquiring assets so as not to overload themselves with debt. The second article in the series will look at how to avoid repeating history if these good times don’t last.

INDIANOLA, IA (DTN) – Mark Ruff of Circleville, OH, was in elementary school when his parents quit their town jobs to start farming. Unfortunately, the year was 1979-80, just months before the nation’s farmland prices hit a record that would stand for 30 years. Like thousands of others from a lost generation of farmers, the Ruffs were buffeted by plunging farm incomes, 20 percent interest rates and a 50 percent drop in land values. They exited the full-time business four years later.

When Ruff and his wife Marcia started farming on their own 12 years ago without family help, they knew they needed to take steps to avoid becoming a casualty of the downturns in agriculture. They made a point to grow about 200 acres a year, avoid rental wars and keep leased land as tidy as if it were their own. They now farm 3,000 acres, but don’t yet own one acre of ground. The upside is that by keeping overhead costs low, “we’re confident we can do well in a low-margin environment,” Ruff said.

American agriculture stands to register what may be the most profitable year in crop production in U.S. history this season, after a string of bumper years since 2006. Prosperity has attracted new entrants back into the business, but young farmers are especially vulnerable should agriculture suffer another acute financial shock. When the Kansas City Federal Reserve stress-tested Midwest farms for a 30 percent drop in income and a hike in operating credit to 8.5 percent from today’s artificially low rates, more than half of farm borrowers under the age of 35 would suddenly plummet into bank regulators’ “severely stressed” category, Economist Brian Briggeman found. That’s largely because they lacked the profit margins and the reserves to weather a financial storm.

In this first of a two-part series on the Young and the Landless, DTN will examine how young farmers are acquiring assets so as not to overload themselves with debt. The second article in the series will look at how to avoid repeating history if these good times don’t last.

INDIANOLA, IA (DTN) – Mark Ruff of Circleville, OH, was in elementary school when his parents quit their town jobs to start farming. Unfortunately, the year was 1979-80, just months before the nation’s farmland prices hit a record that would stand for 30 years. Like thousands of others from a lost generation of farmers, the Ruffs were buffeted by plunging farm incomes, 20 percent interest rates and a 50 percent drop in land values. They exited the full-time business four years later.

When Ruff and his wife Marcia started farming on their own 12 years ago without family help, they knew they needed to take steps to avoid becoming a casualty of the downturns in agriculture. They made a point to grow about 200 acres a year, avoid rental wars and keep leased land as tidy as if it were their own. They now farm 3,000 acres, but don’t yet own one acre of ground. The upside is that by keeping overhead costs low, “we’re confident we can do well in a low-margin environment,” Ruff said.

American agriculture stands to register what may be the most profitable year in crop production in U.S. history this season, after a string of bumper years since 2006. Prosperity has attracted new entrants back into the business, but young farmers are especially vulnerable should agriculture suffer another acute financial shock. When the Kansas City Federal Reserve stress-tested Midwest farms for a 30 percent drop in income and a hike in operating credit to 8.5 percent from today’s artificially low rates, more than half of farm borrowers under the age of 35 would suddenly plummet into bank regulators’ “severely stressed” category, Economist Brian Briggeman found. That’s largely because they lacked the profit margins and the reserves to weather a financial storm.

In this first of a two-part series on the Young and the Landless, DTN will examine how young farmers are acquiring assets so as not to overload themselves with debt. The second article in the series will look at how to avoid repeating history if these good times don’t last.

Editor’s Note: This is part one of a two-part series entitled “Young and the Landless.”

For a copy of the Kansas City Federal Reserve study on high-debt borrowers and young farmers, go to http://kansascityfed.org/publicat/mse/mse_0610.pdf.

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