Does $4 corn support $14,000+ per acre land?

[hanktbd]

Re: Does $4 corn support $14,000+ per acre land?

No, and neither did $2 corn support $4500+ per acre land.

And neither did $1 corn support $1100+ per acre land.

Those that own land in this area have always paid too much or else it went to someone else who would. The better questions are can you make it work with some degree of safety margin by having lots of down payment money or something like hogs or specialty crops to increase the income, and is this likely to be considered a good buy 10 years from now.

[buckfarmer]

Is that the part if Illinois that raises a lot of seed corn? Seems like I saw the add for those sales and thought there was development opportunity. If either or both of these are true it may not be to high.

[elcheapo]

Maybe if you raise medical lambs quarters?

[crophugger]

All you'll ever do is make a living farming never get rich at it almost have to keep yourself dirt poor if you don't want to give the inept gov. All your money to flounder away. Its the way you invest your earnings that gets ya rich. The only farm I regret buying is the one I didn't buy.

[Shaggy98]

Everyone always asks if $X corn will support this or will it support that, is corn the only thing we produce?  What about $X soybeans, $X sunflowers, $X oats, $X wheat, etc, etc, etc...

Last time I checked, oats, beans and even wheat still had a respectful price.  In my area $10 corn wouldn't buy anything, because we don't produce hardly any.  When did we become all about corn?

[hardnox]

I'm reminded of a study that an Ag Econ professor at Purdue did many years ago.

He looked at a large number of prosperous farm families who had been on the (now regrettably defunct) Purdue farm records system for a long time so he had actual data. The purpose was to try to determine where their net worth came from. He used something like a 30 year period and I can't recall exactly what, thinking maybe '60s through '80s, but anyway. Both those numbers are from memory, but basically the facts are the same regardless.

His conclusion was that a very large portion came from asset appreciation and relatively little from retained earnings. Those farms would have been a little different beasts than many today- mostly mixed livestock/crop. But anyway, they basically lived off the livestock income and had relatively little left after that and held the land together, which ultimately appreciated.

Land has appreciated a couple hundred percent in the last decade so I'm thinking further sharp appreciation is unlikely in the intermediate term. Sue me if I'm wrong.  And if there is debt associated with the purchase- either through a mortgage or through a shift in structure (more term borrowing) it is going to have to be serviced from somewhere.

After this incredible run of profitability there are certainly folks out there who now have enough owned land- and cash- that they can live with a purchase if they want it.  Others can't.

PS. In regards to the study example and the mixed crop/livestock farm of yesteryear, I think the 100% crop farm has some additional challenges in terms of lack of diversification- buying high priced land just pours more eggs into the same basket.

I'll admit to being inclined to look at the large crop business model with a bit of a jaundiced eye- even though the boom, and the government's recent attempt to put strong support under the bubble they helped blow- made them look golden.

Still a very challenging management task in a post-bubble environment which some will not be up to.

[hardnox]

I actually skirted the essential question. Yeah, I think $4 corn is a "post-bubble" environment.

[sw363535]

Corn because of the sale location ............

Corn does not support that high of a price.   Unless ego buying is considered something worth supporting.

But a manipulated interest rate and a "bad investment" economy does.  

[BA Deere]

Shaggy- the thing is the "$14,000 land" is the stuff that corn will be planted on, so whether it`s $2 or $8 on 225bu/acre that`s alot of gross revenue difference.

Nox- a typical shall we say "BTO" go his wealth kind of like this: "Gramps" got married in 1950, his dad gave him a 240 as a wedding present, grandmom was gifted a 160.  When the older relatives retired the family land was rented to Gramps at a reasonable rate.  And when worries of house payments and groceries are off the table all availble money can be plowed back into the operation.  Banks had little risk borrowing to such opperations, even in a down farm economy.  And that wealth just would keep snowballing as long as no really stupid decessions were made.  I`m struck by what someone in that group said in the early 1980`s farm crash when land was worth 1/3 of it`s 1979 levels, "Yes, I bought the farm for $3,000 and now it`s worth $1,000......but I paid cash.   ".   See, that $3000 farm that went to $1000 wasn`t anything for him to break a sweat about, if it sold today it`d bring $10,000 or $12,000.

[Red Steele]

Not sure what kind of abberation this was, if it was, but reports are that a nice 80 in Cottonwood County MN just breached the $14000 mark. THis isn't Illinois, this isnt $10000 for some of Iowa's finest, but this is $14000 for MINNESOTA land.

Makes me wonder if it was a couple of hog millionaires in a urinating contest or something.

Maybe $4 corn doesn't support it , but cash sure might.