Farmland Values

my buddy in SE nebraska just sold 80 good acres:eek:.........now he's almost a millionaire. good thing they still have 240 more in case the $$ runs out!!
 
feasantfever said:
that acreage sold for over $10,000 an acre. even if they farm road to road that won't cashflow.:mad:
Click to expand...


that's what I can't understand.......does a loss actually turn into a gain if played the right way????? write offs, subsidies, etc, or does big AG have that much money to throw away?
 
cockrocker said:
that's what I can't understand.......does a loss actually turn into a gain if played the right way????? write offs, subsidies, etc, or does big AG have that much money to throw away?
Click to expand...

You pay for it with the revenue from land that you already have paid for or have quite a bit of equity in. If you can do that for a while usually inflation will catch up and it will cash flow in a while. 5 years ago I bought a quarter that would not cash flow and thought I was nuts for doing so but did it anyway. the land has doubled and now I could probably make the payments with the rent. It is the first few years that you have to get through. It could go the other way too there are no gaurantees.
 
cockrocker said:
does big AG have that much money to throw away?
Click to expand...

You mean do family farmers have money to throw away. That is who is buying the high priced land, not some big bad boogie man we have named "Big Ag". It is father and son operations.
 
moellermd said:
You mean do family farmers have money to throw away. That is who is buying the high priced land, not some big bad boogie man we have named "Big Ag". It is father and son operations.
Click to expand...

There's lots of father & son's that could be considered Big Ag
 
I own quite a bit of land and watch a lot of land sell. The land that has sold recently in this area is being bought mainly by family farms. The farmers have made enough the last few years that they are actually outbidding the investors. I guess I don't know what BIG AG is, but I guess that is whatever someone thinks it is.
 
Thanks for posting Wirehairs. I missed the show but watched the video on the rock center website.

This may sounds wierd but the biggest thing was how everyone referred to the ground as "dirt" and not "soil". Dirt isn't worth much but soil is worth alot.

Big Ag tends to view the earth as dirt and not soil. It took me a while to get that and had to be schooled by my local NRCS DC to understand the difference.

To the sustainable AG man he views the soil as everything and if you care for the soil and never compromise it then it will take care of you at all times.

2 very different philosophies. watch for them in your media propoganda and even in casual conversations you have. Even more important is watch for it in your own thinking.
 
All depends on your definition of dirt. I know a few soil scientists from universities that will refer to it as dirt as well. Dirt is not a "dirty" word. Using the word dirt might make em a little more redneck but it doesn't necessarly make em less of a steward of the land.:)
 
I realize that some farmers are putting down payments of 40 or 50%.
I also realize that field corn has risen over 100% in the last few years.
My only question would be, when corn prices pull back, and they will.
When the price of corn can not cover the payments on the dirt or soil, which will happen.
Who will be left to "bail out" the poor family farmer.
I am a pure capitalist. I know many farmers will be factoring in the inflated land prices at this current market and they will be waiting for the pull back in prices so as to grab land at an auction.
To them I say hats off and good job and intelligent business practices.
I am annoyed with the farmers who will have John Cougar Melancamp and Neil Young singing at the next "Farm Aid" to bail out the poor family farmer who bought the land when corn was at record high prices, but now feel they are the ones who are being mistreated.
Just like the last farm crises.
History repeats itself over and over but in farming, the cycle is extremely predictable.
 
So what was this farmland selling for 2-3 yrs ago (08/09) when farming was low?

I get that "you can't make any more farmground" -- but, the inputs and profits went up so fast, it's like the growth period of the US not so long ago..it will correct itself.

I live on both sides of the aisle, agriculture and conservation...I'm smiling to see the farmer make a good living, I just hope the race to land grab doesn't come back to hurt them.

Has anyone ever tracked what $1 or 1 bushel of farming equates to for the economy? Similar to the auto industry and the trickle down/fallout into all parts of the economy....?
 
There are several farms that have been bought by farmers I know of the last few years that were paid for in cash. There is also a lot of cash sitting on the sidelines waiting for more to buy. This is different from the 1980's. Interest rates are lower and farmers aren't nearly as highly leveraged. A lot of the guys buying land now, are the ones who made it through the 80's so they have seen what can happen. If a farm is paid for it is very hard to not make money even if grain prices do go back down. I'm not sure land is done going up yet, there is still a lot of money waiting to on the sidelines to get in the market. The realtors I have looking for land tell me they have a big list of buyers, the problem is no sellers.
 
fsentkilr said:
There are several farms that have been bought by farmers I know of the last few years that were paid for in cash. There is also a lot of cash sitting on the sidelines waiting for more to buy. This is different from the 1980's. Interest rates are lower and farmers aren't nearly as highly leveraged. A lot of the guys buying land now, are the ones who made it through the 80's so they have seen what can happen. If a farm is paid for it is very hard to not make money even if grain prices do go back down. I'm not sure land is done going up yet, there is still a lot of money waiting to on the sidelines to get in the market. The realtors I have looking for land tell me they have a big list of buyers, the problem is no sellers.
Click to expand...

fsentkilr, I agree with the majority of your post. Honest I do.
One comment that has caught my eye is the "This is different from the 1980's"

Now I might very well be taking what you mean completely wrong, in which case my next comment will be invalid. It is sometimes difficult for me to understand the exact meaning of a thought when it is written and not spoken. In which case please disregard my entire comment below.

I can not give the number of times I have seen freely traded markets (land prices included) where the comment along the lines of "this time is different...." has been used.
Farm land prices are directly tied to one thing. The price of the commodity that the land can produce. This in my view makes farm prices much easier to predict then other markets.
Commodity prices go up, land prices go up. Prices go down, land goes down.
I completely agree that a number of current farmers made it out of the 80's ok.
I also know human nature is to somehow justify actions with the view that "this time is different"

For any farmer who is able to pay outright cash for a farm. I agree 100%. It will be difficult to loose the farm due to lower corn prices.
For the farmer who takes the attitude of "I will put down 50% of the value of the land because that is surely a big enough cushion...." They are wrong. Dear farmers, has the price of corn ever dropped over 50% from markets highs in the past 100 years.

fsentkilr said:
The realtors ....... have a big list of buyers the problem is no sellers.
Click to expand...
That comment is almost exactly word for word what was said in the US housing bubble. The realtors who reinforce the mind set that 50% down in a over heated farm market is safe. They are wrong. And I know realtors who will say that. They are just sales people after all.
Farm land is only worth what the commodity it produces is worth. That is all.

I recall the talking heads on the money shows stating " The dot com companies are different then a traditional company and therefore the prices to earnings ratio does not apply......"
For some reason Warren Buffet did not buy that logic, when asked repeatedly why he did not invest in the dot com companies during their hay days. And he was looked at as a "past his prime" investor at that time.

My gut tells me that after the 80's, their are a number of farmers waiting for exactly what is happening to happen.
Inflated farm prices due to high corn. Wait for the corn prices to come back down. Wait for the fire sale on farms which were purchased at inflated prices. Buy said farm for over depressed prices.
That is what my gut says.

Honest fsentkiler, I am not attempting to be offensive to you or any other farmer on this forum. I am simply stating what I have learned over the years of dealing in freely traded markets.....they go up then they come down then they go up then down ect. ect. no freely traded market different...ever.:cheers:
 
I have no doubt that land will come down eventually, I just don't think the high is in yet. This is different from the 80's. There is a lot more land owned free and clear that won't be forced on the market by foreclosure. When I say its different than the 80's I don't mean it can't go down because I think eventually it will but from what price? Land has always went up and down just like any other market, but it has always went back up in the long run. I don't care what land price does in the short term, because I'm not planning on selling any of mine anyway.
 
fsentkilr said:
I have no doubt that land will come down eventually, I just don't think the high is in yet. This is different from the 80's. There is a lot more land owned free and clear that won't be forced on the market by foreclosure. When I say its different than the 80's I don't mean it can't go down because I think eventually it will but from what price? Land has always went up and down just like any other market, but it has always went back up in the long run. I don't care what land price does in the short term, because I'm not planning on selling any of mine anyway.
Click to expand...
My mistake fsentkilr. I miss understood what you meant by "different" in your original post. Agreed, I do not believe the high has been hit yet either.
I agree with what you are saying. Sorry if I muddied the water.

:cheers:
 
Wirehairs said:
All depends on your definition of dirt. I know a few soil scientists from universities that will refer to it as dirt as well. Dirt is not a "dirty" word. Using the word dirt might make em a little more redneck but it doesn't necessarly make em less of a steward of the land.:)
Click to expand...

The analogy I was told was that dirt was what you sweep up off your kitchen floor:D
 
I don't disagee with the idea ground may go higher, but when it goes lower,it's likely to be a precipitous drop! Problem I see is that operating loans are done off net worth and profitability. When ground drops in value, no matter whether it's free and clear or not, though free and clear leaves some margin of error, with a drop in net worth, and poor prospects for profitability due to crashing comodities, (and there can be not drop in farm land prices without a corresponding crash in commodites), banks will simply not lend to provide inputs and operating expenses, or will lend at exhorbitant rates, leaving producers stressed, thereby creating a crisis where none necessarily exists. It's the same knee jerk reaction we see in the housing market now. I wise government would seek to stabilize the commodity market, thereby stabilize the land prices, avoiding the wildly swinging pendelum of boom and bust. Sure as we have a boom, as now, we are that much closer to a bust. Example in point is the artificial low interest rates currently, vainly trying to shore up the economy. If rates increase even a couple of percentage points, the whole house of cards grinds to a halt. Hard to believe we started the last great recovery and boom cycle with 10-12% interest rates on the street. What would 10-12% do now?
 
fsentkilr said:
There are several farms that have been bought by farmers I know of the last few years that were paid for in cash. There is also a lot of cash sitting on the sidelines waiting for more to buy. This is different from the 1980's. Interest rates are lower and farmers aren't nearly as highly leveraged. A lot of the guys buying land now, are the ones who made it through the 80's so they have seen what can happen. If a farm is paid for it is very hard to not make money even if grain prices do go back down. I'm not sure land is done going up yet, there is still a lot of money waiting to on the sidelines to get in the market. The realtors I have looking for land tell me they have a big list of buyers, the problem is no sellers.
Click to expand...

I agree. Case in point is when I here are local soil district telling me that farmers are paying cash to have trees planted for a tax write-off. That would mean they have all equipment they need/want and land too.
 
You must log in or register to reply here.
Back
Top