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wt510151
Senior Contributor

Re: How does "debt deflation" enter into the mix?

If you think government workers' checks are not going to keep up with inflation, why do you think private businesses paychecks will? I'm talking about the bottom 90%, not the executive's pay. They pay themselves like the Congress.

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kraft-t
Senior Advisor

Re: The Case for $30 per bushel Corn

 Red, I remember the early to mid 70's when I had corn under seal at $1.10 and sold it for $3.65 and contracted new corn for $3.15. Along with $46 cash rent. The next rent increase was to $105 per acre

 

People were saying that grain prices had reached a "new plateau" and we would never have mediocre price again. Well we soon had evidence that the plateau wasn't as flat and stable as thought.

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Artifice
Veteran Contributor

Re: The Case for $30 per bushel Corn

Nothing personal but if you wwere wring at 4$, why woudl you be right predicting now 10$

coul be whipsaw.

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nwobcw
Advisor

Re: The Case for $30 per bushel Corn

Red, you won't go broke selling at a profit.  Few of us slam the high,just try to nibble at the shoulders of it some.  How long will you want to continue feeding hogs?  That's a big risky investment in my opinion.  How close is the available farm to you?  I gave up far away rented ground when turned 50 as I was tired of running the roads.  How good is the ground?  The quality of the ground is sometimes more important than what you pay for it.  I'd say go for it if you have a good % to put down and can keep the payments reasonable.  That means you don't need super yields or prices to pay for it.  When I buy ground I expect it to pay it's own way.

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Red Steele
Senior Contributor

Not Right or Wrong

Most of my 2009 production was forward contracted for $4.50 cash...closing out the books on 2009 at $4 cash, a very profitable mark for my yields, does not seem all that wrong to me. For 2010, I am not sure if my $4.50 plus cash average, which is what it would be if I closed out the remaining inventory today is going to be all that wrong, either. I will have to see what the geniuses that have the private consulting services come up with for an average. We typically have a 40 to 50 cent basis here in southern minnesota, so maybe these prices are misleading.

 

I have no clue whether we see $10 corn next year, or even in this decade, but I am just throwing out the idea that the world has been shocked before, and pondering what price levels would result from a similar type of shock occuring at this time.

 

in the absence of a stable unit of measurement, prices really are pretty meaningless....it always comes back to what you can buy from the sale....that is the true measure of making money.

 

If you want to talk to the guy that always knows where the market is going, find NW Iowa Farmer or the other  perma Bear NorthCorn....they always sell at the high right? Where did these guys evaporate to? Were they really just shills for the grain companies,, trying to get farmers to unload their grain at low price levels?

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Red Steele
Senior Contributor

Hog Buildings Vs. Land

My point is that I can buy $1.2 million dollars worth of hog facilities for about the same after-tax cost as buying 120 acres of land. You can't depreciate the principal dollars used to buy the land but the whole cost of the hog buildings can be written off rapidly...over half the first year alone. I can utilize the manure, and this would fix my fertilizer costs. I would do a contract with one of the pork integrators , and not actively manage the barns, or work in them, and would situate them such that I could use an umbilical cord applicator to apply the fertilizer without compaction. I have land in big enough chunks to be able to do this , and also to stay over half a mile away from any building sites.

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BA Deere
Senior Contributor

Re: Hog Buildings Vs. Land

Hey Red, the thing with hog bldgs is in 20 yrs you have junk, with land it will be worth at least something in 20 yrs or even 200yrs. With hogs, if there`s a shortage of pork in 1.1/2-2 yrs the market will be flooded. With grain shortages it takes a year just to start rebuilding pipeline supplies and that`s with good growing conditions. Also be carefull with deals with integrators, you may get stuck with making payments on bldgs that are only half full. All that said this land market is too rich for my blood, if it goes up I own some, if it goes down I don`t want to or have to sell anyway.  

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Kay/NC
Advisor

Re: Hog Buildings Vs. Land

I will be very honest with you, and I am partner with my husband in a very large hog farm for its type in a very well-entrenched area for this iundustry:  I have not really seen anyone work all that successfully with an absentee/hands-off  situation such as you describe. 

We run our own facilities, with me doing business side, Mike managing production.  We did it as just us two until our daughter graduated from high school and then started working parttime for us in college. Added a worker to do washing and vaccinating, plus help in her with loading and unloading hogs, and in her horse stables, a few years ago, when her sideline took off a bit, and Mike wanted to slow down physically a bit at about the same time.   

"Someone" will have to be ready to step up and run the place if your manager quits, is sick, takes vacation and on weekends routinely.  There will always be times when two sets of hands are needed, maybe more, mostly depending upon the contract arrangement you end up with...loadins, loadouts, etc.  Vaccinating is a back killer, and some people cannot take the tendonitis. 

Hogs beat the hell out of you...even the nursery pigs to feeders we raise.  Being in this business is the hardest thing I've done for a living, and I gew up in tobacco country.   The only people who liked tobacco were the ones who grew up sawing and loading pulpwood logs by hand labor. 

 

Regulations are the worst thing hog farmers deal with daily, though, not just the work.  It is not just as easy as spreading manure...you have to keep detailed records, or you eventually will, no matter where you raise hogs, and that is just on the water quality side. 

 It is not "free" fertilizer, and if your regs are like ours, you will not be allowed to boost applications with chemical fertilizers on your land app acreage to boost yields...you are limited to applications that support the Realistic Yield Expectation for that crop on that type of land...not top yield.  Also manure application setbacks from property lines can really be a peeve.  Some of ours are 2500 feet. 

I'd stay away from lagoon management if possible; but, that opens the door for the need for backup power for ventilation in all seasons to prevent suffocation if your power goes down and your pigs are over pits.  Someone has to be on call 24/7...we have alarms, and when one rings the security company, Mike trudges out, regardless of the time or what we were doing, since our house and cell phones are first, second and third on the call list. 

People forget things as simple as how much it costs and what fun it is to manage to have an all-weather road to the place for feed trucks virtually every day of the year, and for pig trucks when livehaul arrives.  No more than it snows in NE NC, it is a pain in the tail.  You will not be able to just curl up by the fire with a few thousand hungry head on the back forty...voice of experience here. 

It is easy to see all the positives when you do not know the negatives.  If I were to list those for you, you'd ask me why we still do this...and I might start asking myself the same thing. 

I disagree that the buildings will be "junk" in 20 years...maintenance happens, but it costs and takes time and energy, too.  Our buildings are 16 years in production this coming February, and I'd say have a lot of life left in them yet.  . 

No contract is any better than the worst one signing it...whether integrator or grower.  There are great examples of cream and crap of both.  We have had some great relationships in this business, and some absolute nightmares...God help you if you get an OCD serviceman for farm visits. 

USDA is  putting some energy into regulating the relationship...but it remains to be seen how sharp its teeth will be in that role.  I tell anyone who asks about building for hog production now to put the facilites on land you can stand to lose, near enough to land you own for manure application, several times over, since you will get newer, tighter regs eventually, which drive/defines pig numbers, and pigs on site and flowing through are your life's blood. 

Being in this business and owning a farm that is a mineral mine back home have both been life-changing experiences for me.  I have resigned myself to the choices I have made - actually, that my husband (farming) and father (mining) made for me - but many people cannot take the pressure. 

It is sort of like what they say about marrying for money:  You still earn every cent.  

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BA Deere
Senior Contributor

Re: Hog Buildings Vs. Land

Hey Kay, I think Red was thinking about finishing bldgs. You have a bunch of options with those, sell 3 acres for the units to a company and you get the manure, while some young yahoo does the work for $8/hd. You can buy the bldgs and rent them to a company and get the manure. There are many other options, my concern is if you have to borrow the money, you`re relying on a lot of other people to come through for you to make your payments. The manure, of that amount needs a plan if you already have high rates of P, manure may not work as you said. I think those contracts can be ideal if you`re bringing a son or daughter into the operation. If you`re basically alone, close to debt free and on the wrong side of 40, why make life more complicated?  Smiley Happy  

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Kay/NC
Advisor

Re: Hog Buildings Vs. Land

Largely my point.  People see "hog buildings, hired hand covering the whole workload, and free fertilizer." and think it's all easy.  It is anything but. 

We started this property's development when we were on the "right" side of forty, barely.  We were at least old enough (at 39) to pick the smallest animals to wrestle with, which has worked well for many reasons.  I remember looking at Mike and sayign preciesly this:  "The biggest dead thing we'd ever have to drag ought not weigh over 75 pounds.  Even I can handle that alone." 

Mortality management is another big concern in many areas.   We can't bury but so much, due to seaonal high water tables.  Incineration is expensive, so we dafaulted to rendering pickup.  Many pieces ot this puzzle, and almost all of them are site-specific. 

You can follow someone else's lead, but only so far.  If your head isn't fully in the hog business, then you are toast.  Not many people haev the patience to resolve all teh issues and deal with cropping, too, at least during planting and harvest.  Hogs cannot wait while you repair a combine or deal with a wet planting season's stresses....livestock has to come first as business enterprises on the farm go.  Not many people are willing or able to deal with that. 

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