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BA Deere
Honored Advisor

Effects of higher grain prices?

The "other site" as well as my talking with friends in real life has brought to attention of the future of farming, especially after the Pro Farmer production survey.  Where are we going with this, if $350 rents for 3 yrs paid up front in advance?  A young guy doesn`t stand a chance. Oh, I know if corn goes back to $3 that will also be a game changer, but let`s say $6 is the new $3.  A ag business friend thinks corporations will move into our virgin area and after a short time will be calling the shots on what farm rent will be, who would have a market to compete?  Landlords would then find themselves on the short end of the stick. I`m not bashing BTO`s, landlords or high prices, I`m only interested in you folk`s thoughts on where this thing is headed.  I believe that farming has evolved technically to the point where "collectivism" could now be successful.  I recall when talk in the 80`s of "big pork inc" would take the hogs, we smuggly would say "Yeah right! Who`ll sit up all night with a sow piggin` Smiley Very Happy" the rest is history.  With crops, a corporate model with all the employees specialized could be very successful. 

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79 Replies
nwobcw
Advisor

Re: Effects of higher grain prices?

   No one knows.  Or if they do they are keeping it to themselves and will make out like a bandit.  It actually scares me the pile of money it takes to plant a crop.  I have been pro active with my land owners by going to them and offering more.  Doing this also gives me the chance to explain to the non ever farmer landlords that we are in uncharted territory and I would like to renegotiate if and when grain prices fall back.  There's a land auction here next week.  The first in years.  It'll be interesting.  Almost all land sales are private and not known about until it's over with.

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BA Deere
Honored Advisor

Re: Effects of higher grain prices?

On the net I read of a farmer already paying high rent and the landlord said `the rent will be raised next year plus I`m raising the 2nd half of this years rent` with the implication that if you don`t voluntarily raise the rent we agreed to this year, forget about next year.   If one looks at this trend of paying high rent, 3 yrs in advance.  A wet behind the ears young pup looking to rent his first 300 acres would have a over $300,000 "buy in fee" ($350x3 yrs=$1050   x 300 acres= $315,000, that would take a very benevolent banker.  A established farmer that kind of thinks it`s a okay deal by knowing his acre base for 3 years and possibly locking in 2 yrs of grain price, gambling on that last year.  That guy might make it work, however it`s looking more like the high stakes poker room.  Thank God, my kids are too smart to want to farm.

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Jim Meade / Iowa City
Senior Advisor

Re: Effects of higher grain prices?

In the mid 90's, I sat with a Cargill executive who told me he expected grains to go to nearly all contracted acres in a decade.  He was wrong, but the potential is still there.  Cargill getting bins in the farmers hands and away from the intermediate elevator was one step.

The next step would be to set a young or smaller farmer up by fronting some of the expenses.  Cargill could go to the farm management agencies and offer them a deal.  Then they could bring in the young, hungry farmer who would essentially work for wages.  It's not that far out of sight.

Right now, we have a lot of older, independent farmers who have their land clear or paid way down.  But, in 10 years to 15 years when the big generational change must happen (we can't all farm into our 80's), there will be room for big money to move in. 

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iowastateisgreat
Contributor

Re: Effects of higher grain prices?

Farmers could be replaced by machines. We already have the technology for a tractor or combine that is completely computer controlled. It is just a matter of time until large ag corps figure how to get further into production agriculture via technology.

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BA Deere
Honored Advisor

Re: Effects of higher grain prices?

That`s right Iowastate, http://www.youtube.com/watch?v=zU4liQvrcm4    Imagine when they get the bugs worked out of that technology.  48 or whatever rows, planting 24 hr days, probably running it`s own seed tender.  Only need for humans is a team of Yayhoos to come running at 2am if the warning buzzers go off.

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iowastateisgreat
Contributor

Re: Effects of higher grain prices?

That's kind of how I see it. Except without the need for a human driver, the equipment may not have to be as big. Today we want big machines to reduce labor. Without any labor, machines will be whatever size is most economical. I can imagine a seed shuttle that fills the planter on the go as well as a grain cart to catch loads on the go.

 

I'll just hang out in the field waiting for some pheasants to fly up at the end of the field unless they replace me with robot.

 

 

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farmandfire
Veteran Contributor

Re: Effects of higher grain prices?

Here in my neck of the world people have gotten into the land sell / buy frenzy. This week in the Sunday paper was just about a whole page of auctions for land sales in the next month. From talking to a very good source there is a land management company not too far from our area that has basically stated that not to even bother unless your ready to start at $450.00 an acre for the upcoming year. And people are running it higher than that. A land auction 2 weeks ago brought $9200 an acre. It was a 80 year old farmer and a 27 year old battling it out. The 27 year old won the auction. The one thing I found interesting is I don't think he has a lot of backing from his dad on this purchase. As for me, at 35 years old, farming 250 acres of my own ground, helping my dad on his side, I am out of the game for trying to rent or buy. It just doesn't pencil out. Corporate farms may be coming shortly. We are seeing some signs of this with a major seed company in our area. We grow for this company and last year they only took a quarter of what we raised for them. Personally I think it is a way for them to lock in acres. We sold some our crop at lower prices, the prices went higher, they released the beans and we trucked them to market. They took the profit. I can honestly say that if we are in a new "normality" that the young guys like myself don't stand a chance. I look at it his way, with my sideline businesses, my fathers operation, and mine I can still work for myself, make a little money and take the ride for what's it's worth. It's just too bad that my five year old son may not have the chance to farm if he wants to. We'll see.

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hardnox604008
Advisor

Re: Effects of higher grain prices?

Hi BA,

 

Yeah, the only thing that kept it from happening sooner was that commodity crop farming was really pretty unprofitable in a conventional sense. 

 

 Which isn't to say that farm families weren't extraordinarily adaptive and for the most part doing fine.

 

Do I recall that you are involved in a form of alternative pork production?  I recall hanging with the former pork prodicer community and suggesting that maybe their "enemies" - the enviro and animal rights groups- weren't so much as the bigs were. End of story there, I think.

 

I think we'll see the ag world becoming more and more bifurcated. No way to stop it anyway so let the corps grow Monsanto triple for the e-plants and Chinese but murder them in the domestic market.

 

 

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idalivered
Advisor

Re: Effects of higher grain prices?

BA, I have to say I have considered offering the rent in advance thing to my existing landlords because (truthfully) this year I will need the deduction. This is a slippery slope, and I hate to get this started but we both know $7 corn won't last forever. Also, i've always preferred to "pay ahead" cash operating expenses before making capital expenditures.  One landlord I discussed it with declined 'cause he didn't want to double up income in one year.

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