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Honored Advisor
Posts: 5,702
Registered: ‎01-10-2012

Re: Got your land rented out for next year?

Will not work. As time goes on. It will be corrupted. Case in point, CRP, has been completely taken over by college educated citidiots, butterfly, weed lovers. Rent being paid is obscenely too high, has put one generation of farmers out of business. And is now working on a third generation.

 

You have demonstrated you are fairly clueless about most of what it takes to be a farmer. I'll guarandamtee you, more gov't in farming is never a good thing.

 

You think the tax payers will stand for this?

 

Maybe you should do some research, why don't you start with looking up with what happened in Venezuela, when the gov't took over the land and redistributed it. How they took it over makes no difference, end result was/is a disaster.

 

You don't understand basis, cash marketing, etc, now you are 180° backward in this off the wall idea.

Frequent Contributor
Posts: 39
Registered: ‎04-04-2011
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Re: Got your land rented out for next year?

I am skeptical of your brainstorm for 2 reasons:

1. So next time I am bidding for land that I want to buy, now I will have the government running the price up even further.

That will really help, LOL

2. How will they decide to rent it to?  If it is up for bids, then it will be bid to a price where the winner still ends up being the loser, as all the potential profit will be bid away by all the competing farmers. 

If someone in the government just gets to "decide", that will invite plenty of  shenadigans

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: Got your land rented out for next year?

I have written many times that I don't have the first idea about farming. But I do know finance and I know the corn market. And if you guys on the front lines are telling me that you need at least $3.75 a bushel to break even and then have to pay rent after that, it says to me that at least in the current supply/demand environment that has prevailed for the last several years and promises to continue for at least several more, there will be a lot of farmers out of business and in bankruptcy court if you don't get some help on the price stabilization front. And that's going to cause a lot of problems downstream, since something like 85% of all US farms are small family owned farms. Take them out of the business and eventually there will be food shortages.

 

I am not advocating land redistribution that takes farm land out of the hands of the people who know how to farm and puts it into the hands of people who don't. My idea would keep the farmers on their land, farming for a profit instead of going broke. So its not Venezuela, its sound economic policy that creates stable agricultural policy. 

 

 

Will the taxpayers stand for it ? Sure they will, especially if the initiative is expressed truthfully : you want o have food in your stores, then you have to provide economic stability to the farmers who produce it. Taxpayers stand for a six hundred billion dollar a year defense budget that has a zillion bases all over the world defending people other than Americans, they stand for a government that is twenty trillion in debt with no plan on how to repay it, and they'll surely stand for it if the alternative is a food shortage. No one is rioting in the streets over a $4 trillion dollar expense ledger each year for the US, they surely aren't going to object to another ten billion or whatever the cost would be to ensure they can have the food they want in the food markets.

 

I understand basis better than you do, I use contemporaneous analysis of the cash basis in part to calculate my targets of where corn futures should trade. And I have seen you guys going broke because of your insistence on cash marketing without forward hedging. You are very good at growing food, but your finances make no sense. You need help, and the only entity big enough to provide that help is the government. And not for nothing, but what I suggest is not a handout program. Remember, in times when the price of crops rise, the subsidies would shrink. The object of the initiative is to ensure the farmer makes a profit so he will be around next year to grow more food.

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: Got your land rented out for next year?

Regarding the price of farm land, its probably way out of kilter like all real estate is right now, and that's a bad thing because it winds up pushing rents up so far that farmers can't make a profit and will eventually be forced out of the business. But if the land was bought into government hands instead of private hands, at least farm rents would come down, because the government would not have to lease the land out for a profit like a private landlord does now. Taking the profit out of the farmland owning business means more farmers can continue to grow food, and at a profit instead of a loss. That's a much better outcome than having farmers out of business because the rents are too high. You can LOL till your ***** falls out, but the bigger priority is to make farming profitable for the 85% of farms that are farmed by small family businesses, to ensure a stable flow of food to the consumers.

 

The rent system the government would use to rent the land they own would not be much different than the system the private landlords use now. The only difference will be the rents will be lower so the expenses of farming fall enough to provide farmers profits instead of losses. You would apply to rent a farm parcel, and if you meet certain requirements that ensure the land goes to the kind of small family farmer that the program is intended to assist, then you will be awarded the parcel. There are other factors that can be considered, such as past income insofar as the government wants to ensure that the more profitable small family farmers get priority since they have been netter at the farming business than those who were less profitable, Call it a merit consideration. So instead of a bidding process that only serves to push rents up again, you make the program a merit process that progressively rewards the farmers who have proven themselves to be proficient at both the agricultural and financial aspects of farming.

 

By having those kinds of parameters in the parcel award process, you eliminate the shenanigans that government agencies could play. The process becomes fair, the better farmers (who you want to be farming the land) receive preference in the land assignments, you keep rents low so farmers can make a decent living and continue feeding the country.

 

The alternative is that a catastrophic number of farmers will be tits up when the next recession comes within the next few years, because corn is trading below $2.50 and your costs are over $3.75. And its protects the American farming industry if these massive new farmlands in South America actually come online.

 

You really have no other choice, because the way you're doing things now will not last for long. There's too much supply of corn and most other agricultural products in the world for prices to rise substantially, and you guys are not made of money. If you want to stay in the farming business you need a new model that helps you with your finances. You either adapt or perish at this point.

Honored Advisor
Posts: 5,702
Registered: ‎01-10-2012

Re: Got your land rented out for next year?

You are like the all new crew at the the soup bean packing plant.

 

They got the general idea of how to do it, but got the beans in the cans in all upside down.

Took some time to discover the mistake.

 

Everyone that ate those beans could only burp, instead of flatulate.

 

You are out of your league, you are making broad untrue statements. Many are still in the black at $3.40 corn. 

 

 

Advisor
Posts: 1,484
Registered: ‎06-25-2010
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Re: Got your land rented out for next year?

Ray
Are you a trader or farmer?
Honored Advisor
Posts: 17,969
Registered: ‎05-13-2010
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Re: Got your land rented out for next year?

If you`re a Bigshot, you can buy seed at half the price, fertilizer and chem maybe 30% cheaper and machinery multiple unit discounts, so always new machinery and no repair bills...little tricks like that.  But all that savings is probably used to bid up land prices, a old goat that`s gonna rent to those will want coffee shop bragging rights of top dollar rent we he sees all the new paint.  

 

So big or small we are all kind of in the same boat.   Heard locally bankers are pulling the plug on rents over $180...well on certain individuals.  But I suppose there are tricks around that too, but if a banker shuts you off at $180, he`s probably doing it so he doesn`t have to recommend an auctioneer to you a year from now.  

 

A lot of the low price problem is the US corn growing region has had above trend yields for 6 seasons now.  Although those of us in north Iowa haven`t seen that, but nationally that has been the case.  

 

If the government would get involved to "help us out" it would have to be done on the cheap.  If it came to that I would favor a 5% set-a-side in exchange for guaranteeing your first 20,000 bushel at $4 next 20,000 bushel $3.75 next 20,000 $3.50 and after that you are on your own....Something along those lines, but so far "get the government out!" is winning and I can live with that too    Smiley Happy

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: Got your land rented out for next year?

Trader

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Honored Advisor
Posts: 8,920
Registered: ‎07-18-2011

Re: Got your land rented out for next year?

That cost analysis, as usual for a university, leaves out most of the labor cost, most of the harvest cost, pays management nothing, and assumes land is free.

 

Cost analysis is not simple.  This chart is simple.... An 8th graders work would be more detailed. and  inclusive.

 

Land cost is not even included......in Illinois it is probably the largest cost factor in a bushel of anything.

 

and this "ray" accepts this as analysis........ many of us do.

 

So we stopped our busy "Marketing" day to try to educate "ray".

 

The whole example is bad...      just apply your own reality and compare.........

 

for example ---Labor cost at $20 per acre and 211 bu per acre..... will not cover the harvest labor.  It takes more than ten cents a bushel to deliver it any where within 40 miles.

The farms I prepare books for pay $15/hr with a final cost much higher. ... They would have to drop to $6 per hour to get any where close to $20 per acre.

 

Smart people  like "ray" always assume farmers donate labor and should pay that net return in land costs.

 

Northern slavery

 

Senior Contributor
Posts: 524
Registered: ‎09-20-2018
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Re: Got your land rented out for next year?

Well if $3.40 is the breakeven, then there's probably no need for intervention from anyone. I was led to believe by other farmers that the real breakeven is $3.75, or that hedging some portion of future production at $4 per bushel in the futures market would lock in a loss.

 

Honestly, I think that any kind of program that sets a floor under crop prices is important regardless of a breakeven. Without it, one Black Swan event where corn spikes down below $3 and stays there for a while risks putting far too many farmers off the land they are working, creating food shortages. The US and global economy are not going to expand forever, uninterrupted. And when they have corrected in the past, it spelled doom for crop prices and farmers.

 

The shame of it is that farmers can ensure profitability themselves through the methods I have described in embracing a good hedging program, but there are way too many skeptics for that idea to ever serve the purpose of protecting farm profits and cash flows. So some other answer is needed, or there's going to be a lot of pain to absorb when this next recession hits and you'll have to live to not only a two-handle but maybe even a one-handle in corn prices.