Something does not add up. Asset values are climbing and farmland is holding firm, yet the people sitting across the table from me are telling a very different story.
Traveling across more than 25 states this year put me in direct conversation with producers, lenders and agricultural stakeholders. A recurring question keeps surfacing: How are both the stock market and farm real estate holding steady, despite the mounting uncertainty and chaos in the domestic and global economies?
Car and credit card delinquencies are at their highest levels since 2010. Forty-two percent of those who purchased autos during COVID-19 have loan balances exceeding the value of their vehicles at trade-in. Meanwhile, many, particularly white-collar workers, are being laid off in droves, and college graduates are finding little traction in a slow job market.
Turning to agriculture, aside from the red-hot beef industry, economic pressure is now the defining reality. Lenders are sending letters to customers whose operating lines of credit are overdue. Accounts payable, credit card debt and restructuring requests are increasingly prevalent across the agricultural lending landscape.
“What gives?” That may be the defining question of this economic moment.
Stock market
The booming stock market is not telling the whole story. Gains are narrowing, concentrated among fewer companies, even as the headline returns climb.
The S&P 500, excluding the “Magnificent 7” (the handful of mega-cap technology companies driving most of the index’s performance), is actually showing negative returns.
Beyond that, companies are betting on productivity gains from artificial intelligence, cutting expenses through labor attrition and a more conservative stance on hiring. A “profit over people” approach is producing strong earnings, as recent company reports reflect. However, this may not be sustainable in the long run.
Pursuing this profit-first posture in an economy plagued by rising inflation across multiple categories raises the real risk of recession and suppressed gross domestic product growth.
Farmland
The same disconnect is visible in farm real estate, despite a struggling profit and cash flow picture. In many regions, demand exceeds supply, often coming down to what might be called the “love property” — the parcel desired by all the neighbors that creates a bidding frenzy. These properties are often pursued by seasoned producers who are looking to expand the family business or legacy and investors with deep equity who seek to hold land as part of a broader portfolio.
The emergence of additional income streams, such as government payments, solar, wind or AI-related facilities, has pushed some values to record highs, often with little connection to interest rates or farm income.
Government support programs and tools such as crop and livestock insurance offer a baseline level of income security, which is often attractive to security-driven investors. Even marginal farmland values are increasing, particularly if the land is suitable for beef cattle, recreation or rural lifestyle properties.
The question becomes: Will the stock market or farm real estate correct first, and by how much? My bet is the stock market, potentially triggering a consumer-led recession.