Declining land prices also mean that there is some erosion on the asset side of farm balance sheets, decreasing their net worth and increasing their leverage even if other factors remain constant. So far the declines are relatively modest overall, and will not greatly affect the financial position of most farmers. But reported declines are still concentrated in regions that have had the most adverse combinations of price, weather and wheat scab. Farmers in those regions who were already highly leveraged may find that the more accentuated declines in those regions will make a significant hit on their financials. Additional voluntary or forced farm liquidations may put more land into sale or rental markets, further augmenting price declines if nothing else improves.
Many rural bankers respond something like the following.
We are not in a crisis yet, but we are about a year away from one. In other words, if currently depressed farm commodity prices do not improve during 1999, many more farmers will see their equity erode to a point where their ability to continue farming will be in serious jeopardy.