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debt and the bubble

Posted: July 7 2011

Remember. Big things start small.

Large, young farmers at risk if land prices tumble
A rise in borrowings for buying tractors has raised the threat of agriculture insolvencies if the farmland market collapses, with large operations, and younger farmers, at greatest risk, America's central bank has warned.
The debt-to-asset ratio on farms run by bosses aged less than 35 has already reached nearly 40%, "a level that has signalled significant insolvency risk in the past", thanks to their greater willingness to run up debts, the Federal Reserve said.
The ratio could reach "dangerously high" levels if the farmland market suffers the kind of collapse today that did in the 1980s, the last major correction, when values halved during the decade.
With big enterprises also notable leveraged, "the number of large farmers facing insolvency could more than double, and the number of young operators [facing insolvency] could quadruple", the Fed's Kansas City bank said.
Read the rest of the article here.

red hook, new york