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10-02-2018 08:59 AM - edited 10-02-2018 09:08 AM
The main obstacle to profitability to corn farmers is the price of owning or renting the land they farm. So the solution is lowering those costs to increase farmer profitability.
Now think about the components of either buying or renting land. Unless you have a large amount of capital that you are willing to spend, you take a mortgage. A typical 30 year conventional home mortgage winds up having you pay not only the principal you borrowed but also interest, and the net affect of your payments over the life of the mortgage is that you repaid two to three times the amount borrowed, with the excess over principal borrowed being interest on the loan. Same holds when you rent, the owner is charging you for the interest he is paying for the loan he took to buy the land, or he is charging you for the profit he wants to make on the principal he expended to buy the land.
Either way, you are paying a lot of interest to use that land, and that is the cost that could be eliminated if the government bought the land and rented it to you so that your rent payments each month were only to repay the government for the principal they spent to buy the land. The more the government extends out the time during which they want full repayment of principal for their purchase, the more the monthly cost would drop.
That's how to make farming profitable, get the profit out of the financing costs of owning the land and pass those savings on to the people working that land. Now maybe you disagree with the principle of having the government helping farmers to finance the costs of using the land. And on that point, I think its a matter of national interest and precedent. Why is it better for the government to give you a hand out through agricultural subsidy than to help reduce the cost of the land you farm. Actually its worse, because if the government owned the land they would gain the increase in value of it over time. When they make a subsidy payment, they never see that money again. In terms of precedent, the government has many many programs to help people who need help, why should farmers be excluded, especially since the production of enough food to feed the country and the world is a vital interest to America.
Not for nothing but the government already is subsidizing the cost you pay for the land you own or rent. You get a mortgage interest and property tax deduction against your income for property you own and live in, and you deduct rent payments from your business revenue in your tax filings. These deductions reduce your tax burden, and help to increase your profitability in your business.
So if you object to the idea of a government coop to make rents cheaper for farms, then you should make sure to also tell your accountant not to take a mortgage interest and property tax deduction on your income tax filings, and do not deduct your rental payments in your business tax filings. But if you in principle agree with the deductions delineated above, then you really do not disagree in principle with a program that reduces your costs in a substantial way.
10-02-2018 09:34 AM
Must be nice to have all the answers.
Too bad they don't line up with the questions.
Very little wealth in renting for the grower, all the suppliers get it.
Fed gov't doesn't pay property taxes, who's gonna pick up that slack?
The real wealth in farming is accumulating land, impossible under your plan.
Writing these thousand word essays over and over is getting redundant squared.
10-02-2018 09:41 AM - edited 10-02-2018 09:52 AM
Your discussion is a good example of "talking down" to farmers, many of us have university degrees, some have advanced degrees, our average age is high, our years of experience is high. Plus we are mostly a very independent bunch. I totally understand what you are saying, and without getting into details, just cannot agree with your concepts for government buying land and renting to farmers. Somewhat less disgusting would be cooperative ownership of land and doing the same thing. These seem like communistic, or at least communal, type of concepts. As for a few of the details, the tax deduction benefit for mortgage interest and county RE taxes are fairly minor items in the overall scheme of things for quite a few of us, though more significant for those with higher debt loads.
I also seriously doubt that a government or coop land ownership scheme would lower rent/lease rates, it would still go to the highest bidder, or leave the average white male out of the equation to achieve "equality" for the less advantaged, etc.
PLUS, long term land ownership probably accounts for 1/3 of my overall net worth, via land value appreciation over time. In my previous career, I saw many farmers stay in business for a lifetime, whose net worth was likely 50% (sometimes significantly more) due to long-term real estate ownership. This opportunity and benefit should not be taken lightly.
10-02-2018 09:59 AM
First of all if you don't like it, no one is forcing you to read it. The basic problem to profitability is land cost, either through ownership or lease. There's a good way to reduce that cost that costs the taxpayers nothing over time. And it makes farming profitable for the small farmer.
The reduction in property taxes collected by the land the government purchases will be more than offset by the increased income taxes that will be paid by the resultant added profitability of the farmers benefiting from the program.
Land accumulation for the private sector still will be easily gained. There are millions of acres of farmland in America, the government is not going to buy it all. As I see it, its better that a hundred thousand farmers make a profit to sustain them in the vital interest of growing food than it is for 10,000 land owners to get rich off the rent collected from those hundred thousand farmers. We need the farmers more than the landlords. Governments always make decisions that pit one group against another, and such decisions are supposed to be made to benefit the group more important to the vital interests of the country. Being that we cannot eat dirt but only the food produced on that dirt, the farmer occupies the greater national interest.
I don't have all the answers, but this one is too easy not to see.
10-02-2018 10:18 AM - edited 10-02-2018 10:20 AM
I am not advocating total government ownership of farm land. There's more than enough farmland in America for private ownership to have as much as it wants. What I am saying is that something like 85% of all farming is performed by small family farming enterprises, and they all seem to have a problem making a profit for their labor and expertise with corn prices perpetually below $4 a bushel. Few of their costs can be reduced, but the cost they pay for the land they farm on can be.
So regardless of the political science ideology involved, you have a very stark choice : either support these farmers or watch the supply of food diminish as farming becomes an un-economic enterprise for all but the most well capitalized. America's vital national interest is to maintain a healthy agricultural industry that feeds the country and the world. Accordingly the government must come down on the side of supporting farmers.
It is short-sighted to think that the only way to distribute the land in such a program would be to auction off parcels through a bidding process. There is a much better way, through a merit system. The farmers who apply to rent land under the program can be evaluated based on past performance as farmers, with the priority of who gets what and how much based on merit of the applicants. The land per acre would be distributed at pretty much a common lease rate, with adjustments made for the quality of the land.
When you consider that you pay a 30 year mortgage two to three times over when the interest is factored into the equation, its difficult to accept your premise that mortgage interest is a "fairly minor" item in the whole scheme of things,. Remember, what we're talking about here is reducing the cost of production by maybe half a dollar a bushel, and as such, almost anything that contributes to that reduction is worth implementing to get to the target cost that most farmers will profit from.
If you think I am trying to talk down to you, you're wrong. If I didn't think the people who visit this site could understand what I write, I would not spend the time doing it. Yes, I may be a bit verbose in my explanations, but even still there are readers who still mis-interpret what I write. I go into detail on matters I think are important so as to avoid mis-understanding or mis-interpretation. I don't know if I am correct, some of these program ideas seem to be wise but that's why I post them in a forum where experienced farm industry people have the chance to critique these ideas. If the ideas can pass muster in this environment, then maybe some of them might have a chance to be picked up or suggested to an elected or appointed official who can take ownership of them for the benefit of the farming industry and the American consumer.
Face it, American farmers are in a very difficult situation where its almost to the point that farming will not provide them with the incomes they need to support themselves and families. Rue the day that such happens, because the costs then will be too high to fathom. If America's farmers start disappearing because the economics of the industry cannot afford them a decent living, then people living at the economic margins will have a very difficult time finding food. Look what happened in the Soviet Union at the end, there was hardly any food on the shelves there were long lines to get what wasn't available, and people starved. That's the result of foolish agricultural policy that puts land owners in a position of higher priority than food growers. That cannot be allowed to happen in America, and this is the kind of situation that government works well in. The price to work the land needs to come down., and any prospective program that can accomplish that end in a reasonable way should be considered and embraced.
10-02-2018 10:25 AM
I gotta get a job as a broker - looks like alot of free time
Government is way too big already!!
Must be alot of money in it cuz there are so many wanting to get into it.
Kind of like selling mattresses.
10-02-2018 10:37 AM
I am not a broker. I trade this market for a living.
I agree that government is way too big already, but that;s more a result of foolish priorities than getting involved in solving problems. You make me believe that the problems that farmers encounter in making ends meet is to some large degree their own fault, because if you are any example, you resist the medicine that can make you healthy again.
10-02-2018 10:41 AM
Is that the best that you can do ? Not even a valid critique of why you think any of my ideas would not work ? Very disappointing.
btw, I am not being paid to write what I write, I came here to see if there was any information of value that can help me to understand the corn market better.
Obviously I was wrong in that pursuit. You are correct, I am out of water insofar as I wind up trying to open closed minds who are working themselves into bankruptcy by continuing to cling to the same failed financial practices that have gotten them in trouble to begin with.
What's the famous line about madness being the domain of people who keep performing the same failed practices over and again thinking they will get a different result ?