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Veteran Contributor

Is it a bad thing

I have heard from many different sources that we are not on a bubble in ag. We do some custom farming around our area. Is it a bad sign when city folks who have 2,3,4,5,6 acres of ground that has never been farmed are calling and wanting it ripped up so they can plant corn or beans into it? Or when banks are buying ground and having it custom farmed? I have heard before from retired farmers that when non-ag gets into ag the fall may be coming. Any thoughts?

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44 Replies
Honored Advisor

Re: Is it a bad thing

Is it possible that they had horses and one day a lightening bolt of common sense hit them and decided to get rid of them? And got the bright idea to raise corn.  If they do the math on all the ineffeciencies of farming a 5 acre patch in row crop it`d be breakeven and beer money and a hobby.  What`s going to kill the markets is this nice danged weather and possibly a 170 national yield, hope to hell that doesn`t  happen.  One good year here and the market will have a pox on it for 3 years.  If 166 bushel national yield is expected, I hope it`s somewhere in the low 150`s that way everybody gets fed and we get a fair price.

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Honored Advisor

Re: Is it a bad thing

We don't know for sure what last years yield really was.  We are still projecting.

 

BA, does the actual yield have to be 166+???  Won't the projection and expectation for the next 18 months be enough to lower the price to break even or below? -------------------------- Exports will be interesting to watch----------and deliveries will probably have to be delayed.

 

only 2 things will help hold the price altitude we have seen the last few months.  1--A drought in South America that got more attention than ours.  We are yet to hear USDA acknowledge the crop insurance and production losses of 2011 with the same attention they give to "guessing" the future.

and 2.  The present corn inventory-----------with the level of wheat projected to enter feed usage, and wheat export interest prior to harvest.  Also the fact that these are projected and happening without regard to price says we are feeding wheat because we have mo choice for a while.

 

"A pox" ----------------likely--  we better be preparing for it. 

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Honored Advisor

Re: Is it a bad thing

Hey SW, I don`t even listen to the USDA anymore, I got better things to do like straighten Schnurrbart out about Obama.  All the monkeys are on one side of the teeter-totter in thinking "166+++" if things don`t pan out for this crop, this summer those monkeys will be sling-shoted into the crocidile moat.  I hate to say it though,but I`m afraid of a monster crop coming.  And I`ll flat out say it "I want $6 corn! darn it!" I`m not greedy it doesn`t have to be $7-$8, but $6 isn`t too much to ask.  If the nat average is 150, the cash hot off the combine will be $6 =$900 gross.  If the nat avg is 170, cash will be $4 or a $680 gross, $680 doesn`t cut it!!.  I got a little girl in braces, a boy that will be going to college in a couple years, a new shop to pay for, high maintenance wife...I need $6.  Seriously though, maybe a QE3 or is it QE$ or QE5 now? Anyway, maybe inflation will bail us out. 

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Honored Advisor

Re: Is it a bad thing

I fully agree BA.

Thanks for the great return.

 

We are certainly on the way to inflation.  I just can't come up with another option that will take care of our "high maintenance" politicians.

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Veteran Advisor

Re: Is it a bad thing

seeing exactly what you talked about...bankers having land custom farmed for the projected returns greater than rent.....crp coming out of contracts to be farmed again...the latest is so wet on one end and sandy on the other that it never raised a crop for the ten years before it went into crp...new owner, maybe he will pray more than the previous owner and operator.

 

high prices cure high prices.

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Contributor

Re: Is it a bad thing

That is what happened to an extent in the late 70's and early 80's. Bankers, Doctors, Lawyers, insurance companies were all flying over farmland and buying it from the airplane. Here are some more facts. If the government is right and weather holds, we will raise close to 15 billion bushel of corn, not that long ago we raised 8 billion bushel. The world economy is shaky at best, at worst ready to collapse. The Euro may not survive. China... Well you can not believe anything they say. I am not supportive of our government's spending or increasing debt, however our dollar is arguably the best investment when compared to Europe. So if our dollar goes higher exports will subside. I read that the University of Nebraska has spent $10 million in algae research for producing ethanol and its by product as feed for livestock. South Sioux City has received $500,000 for a project from U.N.L. That is growing Algae. When mid western Universities are spending money to promote other forms of ethanol production, to me, is an eye opener. World crop production on the rise. Geo Political issues in the world is a certainty that will continue, and probably come to a head. I read the U.S. will be selling less than 1/2 the world's corn production for the first time ever. Interest has only one way to go. We as farmers have always over produced and are setting ourselves up to doing it again.

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Honored Advisor

The End of Agriculture

About a decade ago, the book by that title got a lot of attention in soem circles.  It's complete title was The End of Agriculture in the American Portfolio (http://www.amazon.com/The-End-Agriculture-American-Portfolio/dp/1567201652/ref=sr_1_sc_1?ie=UTF8&qid...).

 

The main premise was that no one really wanted to invest in American Ag anymore.  We were as a whole program-dependent welfare queens, and no commercial bank wanted to touch our leprous carcasses. 

 

Not long after that, even Farm Credit sought to diversify into non-farm mortgage speculation, which the Congress fortunately refused to allow it to do...thus making it one of the few financial entities not to bite that bullet in 2008 and beyond. 

 

The last time I saw this kind of movement into ag investment was the rush of lawyers and other monied professionals who anted up in the Big Oink here in NC in the early nineties.  You may recall what happened in the winter of 1998-99...does THAT answer your question?

 

This time, I think numbers are being manipulated, in order to make the case for abandoning many of the elements of the ag safety net.  This concerns me that we will have a destabilized ag sector somewhere - anytime after the 2012 elections -down the road. 

 

CRP has been a valiant effort to sideline acres behind a politically-correct facade of soil and water quality protection and conservation.  Sounds like a lot of quail will be homeless soon. 

 

In the meantime, maybe the smaller parcels will serve as something of an entry point for a few smaller operators to gain a toehold...I was under the impression that some of the big boys couldn't turn their planters around in such tight quarters. 

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Frequent Contributor

Re: Is it a bad thing

I'm sure that farmland is now at the peak of its runup.  All time highs.

 

I know this because I always buy "at the top", and I just bought some.  KenJ

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Honored Advisor

Re: Is it a bad thing

Jury Duty,

Good comments, 

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