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Senior Contributor

BTO's To big to fail

I keep hearing people throwing out the too big to fail saying, when it comes to the BTO"s. Are the 3,000 acre and above guys to big to fail in this world. I am starting to think that they probably are dang close. Think of the cash they have accumulated in the past five years with these record prices.

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5 Replies
Advisor

Re: BTO's To big to fail

Tha would depend upon what they've doen wiht what they've earned.  If saved or invested in short-term purchases, maybe yes to being sound enough to survive.  If they stepped out for long terms on loans and are heavily leveraged, then they would be vulnerable. 

Crop farms are cursed with having plenty of guys waiting in the wings to take over acres if they drop the ball, so lenders have not GOT to work with any particular one to get repaid. 

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Advisor

Re: BTO's To big to fail

In the last few years..with the advent of RA and GRIP crop insurance subsidized by our Govt....and the way they've designed the new ACRE program to sign up for our "safety net" I feel it's been made virtually "impossible" to fail. And that is the reason there are people willing to take on the risk of high cash rent, large expanses of land...and huge interest payments on the equipment required to become one of these BTO's. Frankly I don't know if it's good for the industry or not...but what I do know is this. If there is a failure..it's going to be a colossal event.

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Veteran Advisor

Why would it be any different this time?

the government will just socialize the losses , just like in the 1980's and let the deadbeats keep what they have and get more. Capitalism might be a good thing, if we ever had the guts to actually try it.

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Honored Advisor

Re: Why would it be any different this time?

NPr said earlier this week that food prices have only gone up two percent, since there is hardly any of the commodity in them, compared to preparation, packaging, marketing, etc.  This is further evidence of how far removed we are from the consumer...with commodity prices double or more of two years ago, food prices go up more due to fuel than to the main ingredeitne in anything families eat in America. 

Anyone who's a short-term thinker could thus make the argument that America really doesn't need farms all that much anymore, since so little of what we do ends up reflected in the cost of foodstuffs.  The basic raw materials could come from anywhere in the world....

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Senior Advisor

Re: BTO's To big to fail

t know why you would expect them to fail.  Big or small they have had the opportunity to make good money per acre. If they were halfway responsible they would have used the good prices to get the financial house in order.

 

On the other hand, if they were irresponsible they may have dug a deeper hole to climb out of. That may be true if they are large or small.

 

It comes down to the same old seduction. Do I use the money they way I should or do I use it to buy what I want? It takes discipline to do the right thing when there is so much you would like to do. Preparing for hard times is a worthy effort.

 

I'm not wporried about the BTOs and i doubt whether their bankers are. I believe todays banker are more prudenty than those of the 70's and 80's.

 

I c annot understand human nature. Whether it be government or private businees, you would think they would want to retire debt when they have the funds to do it. Make yourself strong and healthy when you have the means to do it.

 

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