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You are here: Home / Agriculture / Economist warns ag economy’s “bubble” may come down soon

Economist warns ag economy’s “bubble” may come down soon

January 14, 2012 By O. Kay Henderson

A Midwestern economist says it’s likely the state’s ag economy soon will be hit by the recession in Europe and slower growth in farmland values. Creighton University economist 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.

“Agland 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. Goss made his comments on the “Iowa Press” program which will air Sunday at noon on Iowa Public Television.

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Filed Under: Agriculture, News Tagged With: Corn & Soybeans, Ethanol, Pork/Cattle

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