Name an asset class that is guaranteed by the US government to have a rate of return. Land. Between crop supports and crop insurance subsidies, the government will guarantee that an investor in land has a return if they know how to secure the revenue. While most farmers will tell you they are farming hardship and risk, they are farming a larger crop, appreciation of an asset that also casts off an income stream yearly.
And that revenue stream is growing. Estimates are that corn increases just generally with science to the tune of 2 bushel to the acre a year. At one point, science thought that 640 bu/acre was the absolute limit of productivity for corn. Last year, in a commercial setting, a Virginia grower had 623 bu/a. The new target appears to be 1000 bpa. How big is your grain handling system.
Lets look at the government support to Iowa alone. In the last PPP and farmers only PPP payment cycle over $5.4 Billion dollars were paid to Iowa operators and land owners. That is 10 percent of the entire payment program for the nation. We have about 3 Million folks in Iowa, but that payment wasn’t smeared across all the hills and plains, it was concentrated in the ag economy. Iowa land values appear to be averaging 6% above the Consumer Price Index inflation over the long haul. Historically it is hard not consider getting in on land grab.
What can kill this golden goose? How about a 25% tariff (which is a non deductible tax paid by the person purchasing not the country of origin or where it was sent. 20 percent of corn and 50% of soybeans are exported. 10% of Phosphorus , 30% of Nitrogen and 90% of Potassium are imported Potassium comes from Canada, Morocco and Peru provide Phosphate and Nitrogen comes from Mexico, Russia and others. I write before these are published so who knows which of those countries will have a tariff on them at the time of posting this article, but I bet its not NONE. Couple that with an addicts level pursuit of alleged government cuts , how long before the knife in the name of budget efficiency is turned on government crop insurance subsidies and environmental based land idling programs like CRP and incentive based land use decisions like EQUIP.
Clearly we have a cash grab that right now appears to be shifting from the producer to the government.
We have seen truly uninspired decisions regarding ag in the last six months, from dismantling of a built in purchaser of food products (USAID and USDA food programs), to a baffling waffle on immigration policy enforcement as it relates to farm labor (with the latest trial balloon indicating that somehow those on Medicaid disability will replace workings in dairies, picking berries and food processing facilities). Literally, we have a people grab.
The problem is the next land grab will be the government taking from those who have been lulled into thinking that they are immune to the whims of the powerful.
