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BA Deere
Honored Advisor

Would your farm pass muster on Shark Tank Show?

Bill Graff brought this up that if farmers went on the Shark Tank show that with what little return, the Sharks would all quickly be "out".  4% wouldn`t cut it.   He brought up if the US goes to negative interest rates that perhaps a 2% rate of return would be attractive enough, so on $10,000 land X 2% = $200 cash rent...I guess that shows you what effect interest rates have on business, in particular a 'negative interest rate", the cheap food policy would remain alive and well.

 

Bill also mentioned that farmers do not have a "minimum wage" some farmers have had negative returns for 2 years now.  Do we need to get rid of farmers that are satisfied with the low rates of return and those remaining only ramp up production when a sufficient rate of return is available?   Don`t see that happening without alotta pain.

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5 Replies
Jim Meade / Iowa City
Senior Advisor

Re: Would your farm pass muster on Shark Tank Show?

If you decide to not use land you are paying for, what does that do to spreadin gout your expenses? 

 

And, since it's impossible to predict when a drought somewhere else mayincrease demand for your goods, how can one decide to fallow land that will raise a crop?

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BA Deere
Honored Advisor

Re: Would your farm pass muster on Shark Tank Show?

Well, this is what i`ve been whistling through the graveyard about, see the inputs have been pressured and i was wondering and dreading the day they`d get around to bashing the land expense.  Well, I already hear they`re pressuring land rents down to balance the budgets.   I like it when land rents are high, that means there`s high revenues and a wide margin of profit, however prices get so low that rents are on the chopping block, there`s no where to hide on the land that you own.

 

 

Let`s say we have a 2.5 billion corn carryover this year and a string of burdensome supply production in the years going forward.  I think there will be fringe acres crying "uncle" and literally going fallow or pasture or a subsistence grass hay deal.

 

But the painfull part would be on prime acres where banks would quit allowing the high rents...it`d been the rent that would "go fallow" 😞   And if the US went to negative interest  rates, rather than pay the bank to hold their money an investor could buy land, keeping land prices stable, but being satisfied with a low rental rate.

 

If you really look at it, just getting enough rent on land to pay the property taxes would be better than paying the bank the store your money...but hopefully a drought or something/black swan will bail us out.   

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k-289
Esteemed Advisor

Re: Would your farm pass muster on Shark Tank Show?

Time  for  a   NEW   GINGLE   ?  orrrr WHAT    -   Feeding the ?????  

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gurly3801539
Advisor

Re: Would your farm pass muster on Shark Tank Show?

Why do experts (and we farmers) jump on the land cost first.  Most of us rent from retired farmers, or if you will the other "little guy."  Shouldn't we have a way of pressuring the seed, chem, and fertilizer, "the big guy" to have to take some cut also?  Another case of it's easier to go after the little guy.  I don't have a good answer to that myself.

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BA Deere
Honored Advisor

Re: Would your farm pass muster on Shark Tank Show?

I agree, land costs (rents) are the one input that farmers themselves bid up on themselves.  If a dozen farmers weren`t in the farm yard of the +60yr old farmer that developed a "summer cold" hoping to get the jump on the funeral crowd and renting that extra half section, then the rents wouldn`t have gotten to the perceived lofty levels.

 

Ag media is talking about "negotiate lower rents now!", well we all want free ag information, so look at the seed, chemical, machinery ads in the places we get our ag related news, then you see where the slant is...I guess in short "Landlords don`t run ads in farm magazines and commercials during the RFDtv Market Report".   The seed companies for example see their customers of course wanting cheaper seed, but they feel they`ve lowered their seed enough. So they see the landlord getting $250-$300 rent, well that`s a potential source of money that could go in spending more for seed,chemical and machinery..in this mad dash for the farmer`s dollars.