BA, I have 200 acres of prime land coming up for sale right in my backyard. Better than anything I currently own or farm, and I am not even going to the auction. I could buy the farm, at what I think it will go for, and probably not miss any meals, but I sense that we are right at the point we were in 1980 when I had to make a choice about buying a farm then, only then I didn't have any money and I would have had to take my father down with me if things went bad. I got an education instead, and ended up buying several farms ten years later for about a third of what anything would have cost in 1980. TIming is everything. The guys that bought land in 1980 got an expensive education, too.
I think high grade land, the stuff that would average 180 bpa corn, and 50 bpa soybeans over a five year period, should be priced closer to $5000 rather than $10,000 or more. Of course, this is all based on a stable dollar, and you have some that bought gold, a worthless income producer, at prices close to $2000 per ounce based on their fears of hyper inflation. And that view may very well turn out correct. I just don't make speculative business plans based on that.
Rents are going to have to come down, based on my math. This hypothetical 180/50 bushel land should only rent for about $200 per acre , based on current inputs and price projections.
Corn Revenue at $4.25 is $765 per acre and a no-frills budget is about $450 per acre, with $100 seed $135 fert, $35 chemical, $25 for crop insurance, and production expenses of $155 per acre. Throw in $50 for some sort of profit, and overhead cushion, and you end up with a corn margin of $265 per acre for land cost.
Soybeans fare worse....$10.00 beans at 50 bpa average gives you $500 to work with, and $50 seed , $70 fert allocation, $35 chemical, $120 production expenses, $25 crop ins, and $50 profit and overhead gives you a margin of only $150. So the average of a corn/soybean rotation is just over $200 per acre available.
Sure, you have guys that are going to average 225 bushels per year in their dreams and 65 bushel beans, and for them, the sky is the limit. I am just trying to be realistic. I know you have the years that the prime ground doesn't look so prime, but that is the color of the sky in my world.
