Both "farmers and students" are taking on mounting debt that is totally unsustainable going forward, which has "bubble" written all over both of them. Student loan debt today exceeds $1 trillion. Yes, that is trillion. As of December 31, 2012, the delinquency rate on student loans has surpassed that of credit card debt. Why? According to a TransUnion study’s analysis of government data, more than half of the college graduates under the age of 25 are unemployed or underemployed.
Now, in regard to farm real estate, farmland prices in the heart of the "Corn Belt" have increased at a double-digit rate in six of the last seven years, according to a study by the Federal Reserve. "The study states that farmland prices were up 15% last year in the most productive part of the corn belt, and 26% percent in the western corn belt and high plains." (In other words, the Fed's QEs have not only manipulated equity prices but farmland prices.) With the rise in farmland prices has come a disturbing trend in the balance sheets of farmers. According to the Kansas Farm Management Association (see the above link), the number of farmers with debt to equity ratios (financial leverage or risk factor) today of at least 40% is higher than it was in 1979, shortly before the farmland crash of the 1980s. Further, those farms with a debt to asset ratio of over 70% are "three times as numerous today.
Therefore, we have the real potential of "TWO BUBBLES for the PRICE of ONE." And, we thought the sub-prime mortgage bubble was bad. However, we haven't seen anything yet with these two bubbles getting ready to burst!
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