July 31, 2014

Economist: Midwest farms will feel hit from European recession

Dr. Ernie Goss, Creighton University

A Creighton University economist says it’s likely the region’s agricultural economy soon will be impacted by the recession in Europe, with part of the ripple effect being slower growth in farmland values.

Ernie Goss says the hit won’t be anything like the Farm Crisis of the 1980s, however.

“When I was a kid, we talked about dirt poor. Dirt’s not poor anymore. In fact farmland is the new gold,” Goss says. “These growth rates are unsustainable. There is air in the bubble, the question is when air comes out. I expect some of it to come out in 2012, but not much.”

According to Goss, the problem during the Farm Crisis was people had been buying farmland on credit — and interest rates were sky-high back then.

“Ag land purchases now are a lot to do with cash. This is not over-leveraged farmers who are borrowing from the bank to buy the land which is based on a significant growth rate. That’s not what we’re seeing,” Goss says. “That said, I still expect some of the air to come out of the bubble because of potentially higher interest rates and lower agricultural commodity prices.”

Goss also expects overseas demand for ag commodities from European customers to decline due to the recession, causing a “slight” hit on prices for corn and soybeans.