Agricultural Real-Estate Values
There is growing concern in the real estate sector that escalating debt is rising as quickly as asset value. But unlike most classes of real estate, agricultural real estate is not reliant on debt. Despite economic volatility, the ag real estate debt to asset ratio has hovered between 10 and 15 percent.
“We see that [U.S. crop land] values that are out there in the market over the last 10 years, while they have risen, have stayed below what the cap rate valuation would otherwise indicate,” explains Brian Philpot, CEO of AgAmerica. “We’re not seeing softening yet.”
COVID-19 impacts have varied across sectors. While blueberries saw an initial spike in sales from panic shoppers, supply chain disruptions suppressed prices but are expected to quickly return to stable prices as seen in 2019. Citrus—such as oranges and grapefruits—experienced increased sales from consumers seeking ways to boost their immune system. Livestock is among the most negatively impacted sectors. The decline in slaughterhouse production has hurt livestock futures prices as they work towards keeping production moving.
Despite recent moves towards maintaining the Phase One trade agreement, Chinese purchases of U.S. goods are down 23.5 percent from 2019. Optimism that China will fulfill agreed ag purchases dwindled as COVID-19 emerged.
Is Government Aid Enough to Help Farmers Recover from Losses?
The USDA anticipates the 2020 projected farm income to drop by one-third from COVID-related losses. Financing options beyond the fiscal response will be needed for farmers and ranchers to effectively weather this storm. If you are interested in learning about innovative and alternative financing solutions, contact one of our Relationship Managers at firstname.lastname@example.org to discuss ways you can protect your financial situation for the long road ahead.