Yogi Berra has reminded us that "it's tough to make predictions, especially about the future." With all respect for the Sage of St. Louis, I'm going to make a prediction that is sure to pan out. Here it is:
There is a big and growing bubble in farm land prices across the Midwest, and this bubble will pop, sooner or later. The result will be a rash of failed farms and rural misery.
We know this will happen because it's happened before, most recently thirty years ago. In the 1970s, a variety of factors -- mostly high grain prices -- sent farm land prices to record heights as farmers borrowed heavily to buy as much land as they could. Then, in the early 1980s, other factors -- mostly falling grain prices -- left many indebted farmers unable to pay their debts.
The result: thousands of Midwestern farms failed. Banks foreclosed. Many small rural banks, holding too many bad loans, also failed. Newspapers reported farmer suicides, even the murder of bankers by distraught farmers. Farm foreclosure sales became common social events. Most big farmers weathered the storm, but medium-sized farmers, whose debt soared by 250 percent in the 1970s, collapsed. Usually, they were bought by bigger farmers next door, accelerating the consolidation of Midwestern farming and the decline in rural population.