Ag check engine light on

May 8, 2019

 

BLOOMINGTON – One ag economist feels we are getting close to a recovery in the farm economy but remains concerned over drops in working capital.

 

David Widmar, co-founder of Ag Economic Insights, believes the “check engine” light is being displayed on the dashboard and debt is a major issue.

 

“We need to get some improvement here – we are running on fumes,” Widmar told those attending the Illinois Land Values Conference in Bloomington.

 

Widmar has observed liquidity concerns in the farm economy and his main concern is the continued duration and erosion of farm economic conditions.

 

“Big yields are good at the farm level but create a lot of headaches at the national level,” Widmar said. “We don’t know how the end is going to play out, especially with this trade uncertainty.”

 

Capitalization rates have trended lower over most of our careers and interest rates have slowly increased. Widmar sees cash rental rates moving neutral to lower. Investors are still interested in buying farmland and asset owners are not yet running for the exits. Widmar is optimistic about the long term potential of ag and feels we are headed to a more stable era – something today’s farmers know nothing about.

 

“They’re not fun but they’re survivable.”

 

According to Widmar, agriculture is full of slow rates of change that play out over decades. China has produced 10 million metric tons of soybeans for 50 years now, which is a fairly flat production trend. China imports 60 percent of all available soybeans today.

 

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