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01-20-2013 03:56 PM
I agree. Almost everytime there is that much bullish sentiment the top is near. The latest one was last August when corn was going to $10. and soys to $20.......look where we are now. A big crop in S.A. getting closer and even the dry spell there now will only knock it back a bit. If rain does come to the US midwest by Mar or Apr things could look mighty different by fall. Land values will retrace anywhere from 30-50% once the correction starts. This is so similar to the tech and housing bubble that it isn't funny!
01-20-2013 04:27 PM
I am not going to try and predict land values, but in Iowa most of us that have our land paid for made over a $800/acre net profit. That is based on a $2.52 a bushel cost of production per corn bushel. Also 80% of all Iowa farmland now is owned completely debt-free, so with a $2.52 a bushel cost to grow corn we would still make around a $120/acre net profit with $3.00 corn. This is why things are a little different today than in the mid-1980's farm crisis. In 1985, 80% of all Iowa farmland had a debt on it, today it is 80% of all Iowa farmland is debt-free, plus on the 20% of Iowa farmland with a debt, the debt load is less than $1,000/acre. Not saying we will not get another farm crisis, just that today with so much Iowa farmland being debt free, things are a little different. Pretty darn hard for the banks to take your farmland away from you when you owe them $0 dollars. That was the problem in the 1980's, the banks took alot of farmland away from the farmers and put it on the market to sell, which flooded the farmland market and drove prices much lower than they should have went. But today with 80% of all Iowa farmland debt-free, that will never happen where the banks take millions of acres of farmland away from the Iowa farmers. I think 33% of all Iowa farmers went bankrupt in the 1980's which flooded the land market driving prices way lower than they should have fallen. In 1986 you could buy Iowa farmland for a $1,000/acre, put the whole darn farm in the CRP Program for a $140/acre goverment check and that is a 14% return on investment number. 14% ROI was pretty darn good in 1986.
01-20-2013 04:47 PM
Do some research sometime before you post!!!!!!!!!!!!!!
"Another notable trend occurred in the financing of the farmland. Currently almost three-fourths, 74 percent, of Iowa’s farmland is owned without debt. This compares to the 62 percent of the farmland that was debt free in 1982. "
01-20-2013 05:34 PM
So you say 74% of Iowa farmland is debt-free and I say 80% is. I am not going to fight you on a 6% variance between our 2 numbers. If it makes you feel better, sure I will go along with your 74% figure, but the number I read said 80%. A 6% difference isn't very much but if it makes you happy, sure let's use your 74% figure over my 80%. Either number shows that a helluva alot of Iowa farmland is completely paid for and the land that does have debt, the debt-load is less than $1,000/acre. $1,000/acre debt on $14,000/acre dirt is only 7% of the value, 7% isn't much at all if you ask me. And Iowa has 26 Million acres of farmland worth $208 BILLION dollars, so a 7% debt load state-wide is only $14.BILLION Dollars.
01-20-2013 07:14 PM
In Iowa farmland values peaked in 1981, and hit a low in 1986. In 1987 Iowa farmland values went up 17% over 1986. So if you are using farmland values as a reference to the farm crisis, land peaked in 1981 and hit the low in 1986, a period of 5 years. Again, this is using only farmland values to reference the farm crisis time period. How long or when are you saying the farm crisis years were? But starting in 1987, Iowa farmland values went up every year except 1999. In 1999 they dropped 2% in value, but during 1987 to 2012, every year land values increased, except as noted in 1999 when Iowa land values dropped 2%.
01-20-2013 07:14 PM
Farmland is a very strange investment.
For whatever reason, guys will pay for it even though the asset does not fundamentally make any money on a cash flow basis (not including asset appreciation). Interest easily exceeds the income generated by the property; so bankers are pretty much leery of poor cash flow enterprises, big loans, or young people. I talked to our local farm loan agency, and they rarely, if ever, give anyone who is young a loan without a cosigner with these types of land prices-- go figure. The fact remains that most is purchased with earned income, almost all up front, as is the case in my area and others.
Take away the margin, the volatility, and the gambling and suddenly this business becomes less exciting, and then guys wont be using their disposable income on farmland purchases.
The best way to farm, imo, is still renting; but too bad for you guys in the corn belt, you have to get raped by landlords who want 500 bucks.
I can't understand this lemming effect that we have got here with land prices, and I find myself strangely drawn into it.. I guess everyone needs to stop being so proud, and think about what they are doing?
01-20-2013 07:39 PM - edited 01-20-2013 07:40 PM
RSW says this:
"In 1985, 80% of all Iowa farmland had a debt on it, today it is 80% of all Iowa farmland is debt-free,"
Bob Wisner says this:
"This compares to the 62 percent of the farmland that was debt free in 1982."
I'll believe what Wisner says over this RSW doper who can't get his story straight.
01-20-2013 08:14 PM
Makes retirement easier I suppose. Spend a lifetime paying someone else's farm's off. Just call the junk yard or the finance co to come and get the equip. No Nasty 'ol farm land to get rent or a nice lump sum from.
While you,re at it I think you should always presell that next crop before you plant it.
01-20-2013 11:09 PM
Temporarily, farmerguy89, temporarily on the land investment issue. As you point out things change.
Renting may be the best way to start farming, but is not the best way to finish farming or pass a carreer on to the next talented young guy you see.. And without some ownership long term planning is difficult, as well as long term investment in anything, even equipment.