As ag enters its fifth straight year of low commodity prices, some farmers are quick to compare the present times to the 1980s farm crisis. However, there are many differences between the two.
“First, look at interest rates. In the ’80s, they were 20% or more, and even with our interest rates increasing we’re still in a historically low-rate environment,” says Alan Hoskins, president and CEO of American Farm Mortgage and Financial Services. “We also don’t have the land devaluation like we did in the ’80s.”
In fact, land values are mostly holding steady throughout farm country.
“Cash rent makes up about 35% of operating costs,” says Curt Hudnutt, head of rural business,
North America for Rabo AgriFinance. “Land values are up slightly in some areas, which is not what I expected going into year five of below-breakeven corn and soybean prices.”
Stellar crop yields in recent years have helped support land prices. In addition, many farmers own their land outright, which means they don’t have to sell off land to make loan payments—unlike in the 1980s when rampant land sales were almost the norm to satisfy bank notes.
On the flip side, expenses are higher today than they were in the 1980s, both on- and off-farm. Health insurance costs are skyrocketing, living expenses are higher and capital investments made in ‘good years’ might be catching up with some farmers.