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hardnox604008
Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

I don't think I'd hang my hat on high commodity prices.

 

But even with $4 corn and $10 beans I come up with something like a $250/acre return to the operator and land with a corn/soy rotation on good land.

 

The land ownership is in strong hands and with nowhere else to get any yield they can live with that and I don't expect it tb be getting dumped although I think it may temper some of the high headline numbers.

 

That would be a problem for somebody paying $300 rent although operator balance sheets are strong and can absorb that for a while. Historically that's the first guy to get pinched then you'll see how far that ultimately flows into values.

 

 

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Jim Meade / Iowa City
Senior Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

As long as the farmer is a small piece of agricultural economics it is a commodity business.  In other words, the impetus is to bid expenses up until income won't cover it.

On analogy I've heard for history is that it is not a cycle but more like a spring.  It may go round and round but not in the same track.  There is always some change.  The result of that change can be significant.

It seems to me that the sooner we get SNAP and the Farm Bill decoupled the better off we will all be.  In the long run, it will be much better for agriculture to operate without the artificial constraints of the farm bill.

Any land that has changed hands around here has gone from one farmer to another and is in production.  I don't see the developers and speculators buying farms.  They buy a field or tract next to a present town.

Everyone is tiling, but not all are pattern tiling.  

I agree with Duffy in the long haul.  

 

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hardnox604008
Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

You could just ask your representaives to vote down both sides of the split farm bill- SNAP and farm supports.

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Kay/NC
Honored Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

Maybe I am oversimplifying this, but decoupling monthly SNAP benefits from farm program payments places producers in a situation of being a negliable minority. Let's say 2% are involved in ag... That is about 6, maybe seven, million citizens. Just accessed figures for SNAP participation, as of October 17, 2013, that as right at 48 million of us.

When it comes to moving along the Congress, who would have more clout? Six million sinfully rich ( in the eyes of the taxpayer now) farmers, or 48 million poor people who will go hungry if their EBT card isn't loaded by the third of every month? We are losing that plethora of poster children, if food stamps and farm support go their separate ways.

Most people would be salivating at improving their lobbying power by a factor of eightfold, at no cost. I just don't get wanting to go it alone....
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hardnox604008
Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

It is about white guys who are either relatively well off or believe they should be (see Joe the Plumber) wanting to be Big Daddy Toughlove.

 

I hope they do shoot themselves in the foot.

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AgFuture
Contributor

Re: 3 big-time farmland factors; Income's still king -- Duffy

Interesting that people are so quick to justify $13-15k land prices. It worked at $6.00 to $7.00 corn, but it doesn't at $4.00. Run a cash flow. It doesn't work...period.
Revenue is the key, like any business and gross farm income has dropped. A very smart gentlemen that owns a lot of ground said it best, "A lot of boys are going to be paying taxes on $7.00 corn with $4.00 corn and that math doesn't add up". This ground is leveraged...against other ground or cash they accumulated over two to three years of historic profits. You don't buy $2M farms, trade equipment, build shops and bins with all cash folks. Even if they did, that $2M farm invest will be worth $1.2 in 5 years. If corn stays at $4.00 and interest rates rise 2-3% Did feeding the world create the illusion of a new $7 plateau...or a stretch short crop weather driven markets. We are about to find.
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kraft-t
Senior Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

Those are the folks that took the windfall profits and paid down debt. It doesn't matter much whether your land is worth $10k or $5K if it is paid for.  As long as we got those guys with shiney green paint we will have bidders for cash rent and they will pay too much to keep the neighbor from getting it.

 

Sooner or later most young tigers decide that they can be comfortable without farming 3 counties but they don't come to that conclusion quickly.

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kraft-t
Senior Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

Kay  It would be quite helpful if the administration and our representatives in the house and senate would define and clarify exactly what is the purpose of farm subsidies or subsidized crop insurance.

 

A large portion of our legislative bodies are having **** fits over the subsidized health insurance effort but the same folks have been quite solidly supporting subsidized crop insirance for millionaire farmers. What's more I don't know how we logically can defend it.

 

Another bewildering factor  is congress crabbing about assistance to the poor yet allow highly profitable corps avoid paying living wage. Bill Maher says the average wage that McDonalds pays is $8 per hour and change and the average age of their employees is 29 years old. 29 is no longer teenagers and 29 year olds can't be of their parents health insurance

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BA Deere
Honored Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

Well, yes if you are independently wealthy and you just had $10 million laying in your checking account and you were able to actually use what I would call "cash" to buy that extra 1,000 acres in the last 5 yrs, then all this is moot and you have no worries. 

 

The ones that may have a problem is the guy that was treading water and pulled some shenanigans to come upwith the "cash".  All that new paint that was bought when corn was $7 and schedule 179`d to avoid taxes, will now have to get paid for with $4 corn and oh yeah ..."after tax dollars".  Uff-Dah!

 

http://www.youtube.com/watch?v=tsTAUs_h_uY  

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Kay/NC
Honored Advisor

Re: 3 big-time farmland factors; Income's still king -- Duffy

Thank you for the taste of Willie and the Man in Black this morning. It sequed into a thought about " Ring of Fire" for me.

The thing about high times is that they never last but so long, do they?
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