Saturday, January 30, 2010
This Time is Different
(click on image to enlarge)
For some time, loss of dairy farms has been taken as normal, maybe even healthy by some.
Cows simply moved to a bigger, more “efficient” farm. Unnoticed in all this is the role real estate played in this scenario. Los Angeles real estate values and IRS tax code 1031, drove expansion of dairy farms in the West. Throughout the country banks loaned money to dairy farms, in part because of appreciating land values.
Under those conditions, the data suggests that when milk prices rise, farms got out while the getting was good. Since the beginning of 2009 the getting out has not been good. Unemployment is now double historical levels. Real estate is in the dumps. Cow prices stink. However, if and when things turn round, there will be a huge exodus. Few expansions are on the drawing, so, who will take over milk production?
This time,it really is different.