"Value of SD Land Rising"

[onpoint]

I hope we all know that in farming the farm doesn't set the price the grain is sold at. Just because you buy an expensive piece of land doesn't mean you can raise the price you get for the commodity you are producing. You are at the mercy of the market and will get what the market bears. Farmer are making very good money right now, but it isn't enough to make 10K - 20K work for land cost. I think OldandNew can back me up on this, NO BANK is borrowing money to people to buy 10K-20K an acre farmland. The people that are buying that are people who have the money. Trust me 20K land does not cash flow by itself. 20K an acre will not make any money farming it. That is a long term investment, banking on the price of land will not colapse.

With more and more Corp farm operations. You know it and I know it. They can and do manipulate the market, by storing grain and holding it from shipment until they drive up the prices with artificial shortages . I have seen side tracks here in northern Minnesota in the middle of no where...sitting with Doz and Doz of train cars loaded with grain sitting, waiting for the market to change. Most family owned farms do not have the ability or the luxury to store their grain on the farm and sell when the market is to their advantage but large operations do.

 

[oldandnew]

I hope we all know that in farming the farm doesn't set the price the grain is sold at. Just because you buy an expensive piece of land doesn't mean you can raise the price you get for the commodity you are producing. You are at the mercy of the market and will get what the market bears. Farmer are making very good money right now, but it isn't enough to make 10K - 20K work for land cost. I think OldandNew can back me up on this, NO BANK is borrowing money to people to buy 10K-20K an acre farmland. The people that are buying that are people who have the money. Trust me 20K land does not cash flow by itself. 20K an acre will not make any money farming it. That is a long term investment, banking on the price of land will not colapse.

That's right almost always it's an 80 or smaller tract between two neighbors who see a once in a lifetime chance to add an acreage that fits with what they already own. Usually they have done OK over the years and have a low basis and little debt on the rest of their ground. It's worth more to them than anyone else, as they say location,location, location. If you pay 20,000 an acre for an 80, and own 1200 other acres with an inherited valuation basis of 500.00, the additional cash cost of the 80 doesn't do much to the operating expense, in fact it might temporarily make the surrounding ground appraise higher for a time, synergy of farming that piece along with the rest of the quarter or section has some value as well. Agriculture is a mess top to bottom, we have food competing with fuel, a diacotomy described as a recipe for disaster by Charles Malthus, as long ago as the 1800's, My hog producers are recieving pennies per pound, yet bacon is 5.99 per pound in the super market, corn may be hovering between 5.50and 6.50 a bushel but inputs are minimum triple the price of a couple of years ago. If commodities continue to rise, we will force the world economy to either increase production to stabilize the supply and prices, start a world wide revolution against an irrepairabally broken system or simply die off, to acheive the same balance. Here's betting the "excess" population won't go quietly, I hope they don't! They may be our friends,neighbors, relatives, even ourselves. In either case it will have a devasting effect on us all, eventually commodities will crash, farm income drop dramatically, sacrifice, and real suffering, not like most of us have known, for producer and consumer alike. It would be nice to think for once we could see it coming and soften the blow, but I doubt it. The US government has spent almost 100 years subsidizing agriculture to provide survival for the producer, but mostly to provide a stable and affordable food supply for the consumer/voter. Last time the gobal food system failed, all it took was a global war brought about by the desperation of the 1920's and 1930's worldwide. People grasp onto the hope of outrageous promises, seek blame where non exists, mistakenly believing that nothing could be worse than the status quo. It's never a single factor,it's a series of factors, mis-calculations, outright mistakes or misjudgements, to set the course. We may have already lit the fuse and may not be able to avoid the on rushing cosequence.

 

[SDJIM]

Thats a very scary idea you put forth but I fear it has a real possibilty--I hope not but------

 

[UGUIDE]

Very very interesting oldandnew. You bring in the thoughts in the big big picture.

The aspect of a newer global economy I'm sure will add to the mix of uncertainty and unpredictability.

Through the recession though, AG has been bright and from a few articles I have read the future also looks bright.

Probably the best thing would be for both land and grain prices to level off and settle down for a while.

I get to market and get insurance for a 1/3 of my crop this year:thumbsup: and also pay a 1/3 of herb and fert.

Guess I am in the game now.

 

[blackcloud27]

Heard on the radio today(12/8/11), some land in sioux county Iowa sold for 20k an acre !

74 acres sold for 20k an acre. it was next to a large dairy farm he needed it for silage and a place to haul manure. at that price i would think it would be alot cheaper to rent a farm for manure hauling.

 

[moellermd]

74 acres sold for 20k an acre. it was next to a large dairy farm he needed it for silage and a place to haul manure. at that price i would think it would be alot cheaper to rent a farm for manure hauling.

Can't be. I thought the big bad coorperate farms were destroying everything.

 

[moellermd]

Most family owned farms do not have the ability or the luxury to store their grain on the farm and sell when the market is to their advantage but large operations do.

Every single farming operation I know of, all of which are family owned, stores there grain on farm for marketing at a future time. I do not know of any that do not have at least 30,000 bushel of storage.

 

[oldandnew]

Every single farming operation I know of, all of which are family owned, stores there grain on farm for marketing at a future time. I do not know of any that do not have at least 30,000 bushel of storage.

I think you'd be mentally defective to be a farmer and not have a significant capacity to store grain. That said, the individual producer is playing a game with no control over the market, like buying stocks. Real issue is speculation by the commodity drones who sit at desks, don't plant, nuture or harvest a kernel, yet are allowed to artificially manipulate the market by pre-selling grain they don't own for future delivery, at a high price, then turn around and buy it cheaper at the time of delivery, booking an outrageous profit. This system provides no benefit to anyone except the speculator, if they roll snake eyes, and grain goes higher, they simply disconnect the phones, close the operation and reopen with a fresh new charter, and start over. This goes on with oil, grain crops, current best example is chocolate, some European clown bought up and virtually cornered the chocolate market, thereby controlling the retail price,until such time production catches up. It may be awhile, since chocolate is a low capacity grower. Coffee is similar, and next on the gouger list. These are things that world governments might address,but seem uninterested in.

 

[oldandnew]

With more and more Corp farm operations. You know it and I know it. They can and do manipulate the market, by storing grain and holding it from shipment until they drive up the prices with artificial shortages . I have seen side tracks here in northern Minnesota in the middle of no where...sitting with Doz and Doz of train cars loaded with grain sitting, waiting for the market to change. Most family owned farms do not have the ability or the luxury to store their grain on the farm and sell when the market is to their advantage but large operations do.

With the shortage of railroad hoppers available and orders out to 2015 for new ones, I think it would take a lot to get the railroad to leave 'em sit for very long without a snag in the delivery system, but if the cars are privately owned by the say Cargill, or Bunge, just to pull out a couple of names at random, then anything is possible. Alternative to on farm storage is at the local elevator, problem being if they go bust, which happens somewhat regularly, you lose your grain, even though you never sold it. One of the nice little bite you in the A** rules of the USDA insurance program for grain handlers, grain becomes the property of the USDA insurance program. So I'd either store it on the farm, sell it outright, or be darn sure I could read my elevators financial statement!

 

[Phil V.]

There is an elevator not far from where I live that dumps it on the ground and covers it with tarps and lets it sit most of the winter like that.Then in late Feb. or early March they start selling it.

 

[onpoint]

With the shortage of railroad hoppers available and orders out to 2015 for new ones, I think it would take a lot to get the railroad to leave 'em sit for very long without a snag in the delivery system, but if the cars are privately owned by the say Cargill, or Bunge, just to pull out a couple of names at random, then anything is possible. Alternative to on farm storage is at the local elevator, problem being if they go bust, which happens somewhat regularly, you lose your grain, even though you never sold it. One of the nice little bite you in the A** rules of the USDA insurance program for grain handlers, grain becomes the property of the USDA insurance program. So I'd either store it on the farm, sell it outright, or be darn sure I could read my elevators financial statement!

Nearly all farms have some storage but IMO most can't store no where's near the full production of the farm. Also, storing it at a elevator costs money too. and as you say, It puts it at risk. Another thing, the small farmer can only sit on it so long. They need the money from that crop to continue to operate. Unlike giant operations or middle man who can and do control and manipulate the market by controlling the amount of grain on the market at any one time.

 

[UGUIDE]

Two things not mentioned here are paying for storage at the local elevator and also contracting your crops. Example is if corn goes to $8 this summer then you will see many farmers contract X number of bushels they think they can deliver this fall. When they harvest they go in and drop off the crop and pickup the check.

 

[oldandnew]

Two things not mentioned here are paying for storage at the local elevator and also contracting your crops. Example is if corn goes to $8 this summer then you will see many farmers contract X number of bushels they think they can deliver this fall. When they harvest they go in and drop off the crop and pickup the check.

That's how it should work. The producer with the commodity or expectation of the commodity, using a legitimate marketing tool. Not un backed speculators gaming the system.

 

[moellermd]

That's how it should work. The producer with the commodity or expectation of the commodity, using a legitimate marketing tool. Not un backed speculators gaming the system.

Yea those nasty speculators brought us the opportunity to sell $6.50 for 2012 and 2013.

 

[onpoint]

Yea those nasty speculators brought us the opportunity to sell $6.50 for 2012 and 2013.

Your profits have caused a majority of this countries population a deficit in the family budget.

 

[Lucky1]

Your profits have caused a majority of this countries population a deficit in the family budget.[/QUOTE

I am not a farmer, but live in a rural area. I think many things cause a deficit in the family budget besides the farmer profits. As discussed ethanol & worldwide food shortages lead to the higher prices.

Rail cars are not cheap storage, don't know the cost today (been out of the business too long), wouldn't doubt $200+ per day. Grain co. cars are generally leased longterm based on daily cost basis. Over half of the grain shipped for export goes by barge from some river port on our major rivers. Anything that affects navigation causes back ups of rail cars & adds to the cost of shipping. Today there is no part of our food distribution system & related cost that is not affected by problems or bottlenecks elsewhere.
There are many steps between putting seed in the ground & food in our family's mouths.

Good debate here...

 

[moellermd]

Your profits have caused a majority of this countries population a deficit in the family budget.

The US has one of the cheapest food supplies in the world.

 

[captaincoot]

The ones buying the ground now are the ones that were calling me a f-ing idiot for buying 1800 acre ground Mines paid for and I'm sh**ing in high cotton Time will tell on thiese big land buys But I think the chickens coming home to roost

 

[Matt D]

The US has one of the cheapest food supplies in the world.

And safest food supplies also.

I am not sure what is going to happen with land prices but still believe that at some point we have to stop using food for fuel(ethanol). My gut says when that happens there will be a correction on land prices but tough to say for sure. As always it will be interesting to see.

 

[fsentkilr]

Many farmers do have storage for all of their crop on farm now. Anybody that thinks any producer corporate or otherwise is big enough to control the grain markets has no idea what they are talking about. The money flow from hedge and index funds make even a company like Cargill look small. Some of the comments on here by people who think that a large corporation can hold grain off the market and run prices up have absolutely no idea what they are talking about. I guess maybe the exception would be a county like China who is going to buy enough to make the price go up short term, or cancel some purchases which may make it go down short term, but even the Chinese giant can't influence prices for more than maybe one trading session.