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Danish Agriculture
Danish agriculture has been through a land price bubble in many ways resembling the bubble seen in the Danish housing market. This has pushed up debt to a very high level, and many farms have a slight equity base. Almost all debt is made up of variable rate loans, so normalisation of interest rates will have a full impact. The banks have had higher loan impairment charges and losses on lending to agriculture in the wake of the price bubble, and it has been increasingly difficult for agriculture to raise further capital for succession purposes. In terms of earnings, Danish agriculture is currently in a more favourable position than it has been for many years due, among other factors, to historically low financing costs and relatively good prices for agricultural products. All the same, for a number of years agriculture overall has had an average return on equity of only 2-4 per cent p.a. The earnings and debt situations of the individual farms vary substantially.