cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Frequent Contributor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

I do remember some pretty cheap red paint back in the mid eightys after IH got bought out.

Pretty sure that was below cost of production.

 
0 Kudos
Highlighted
Veteran Contributor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution
Those profits came because of low production!!! Or result of!! This corn crop hits and look for 3 dollar corn?? We will be in a hole of debt we can't see out of!!! It will drag all commodities with it!!! Yes they want all we can raise, and get it as low as possible!!!!
0 Kudos
Highlighted
Senior Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution
No one can control price, but you are in 100% control of your COP. Sometimes top yield doesn't have the top ROI. We as farmers need to find our own happy medium.
0 Kudos
Highlighted
Honored Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

I'm afaid your making assumptions that don't fit everyone.

 

Cop is a highly variable thing. Never 0 but very variable. 

 

My cost of production is way less than my neighbor if my land costs are just 're taxes and insurance and he still has a mortgage and pmts. Or a rent pmt to come up with. If my machinery is paid for and his isn't,  I have another advantage in cop.

 

I could very well still be in the black long after many others are screaming UNCLE. Under these real world differences why would I let up in production if it was still profitable?  Sure it is not the buy a farm a year profitable it was @ $7 + corn. But still having to pay income tax profitable. 

 

We may all be born naked but from then on the equality isn't so equal. JMHO

Highlighted
Honored Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

Since you can still sell this $3 corn you are scared of FOR OVER $4.50 with carry into spring 2015, and you can still sell 2015 for about the same, there is simply no reason to ever have to sell any $3 corn.

 

Profits in ag have ALWAYS been about selling price, not market price or even annual average price, and certainly seldom about yields. The long-term survivors will figure out how to not sell in the bottom 1/3 of the annual range. It really isn't that hard to do, just requires a plan and some discipline to implement it.

 

btw...you can still sell beans within a few dimes of the high for the year. Again no reason to take sub $10 when they are currently over $12.

0 Kudos
Highlighted
Honored Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

Excellent post Hobby. In our peer groups COP by item varies significantly, even if you charge yourself a modest rent on the paid for owned land. Tougher times would be a good thing for many. Higher interest rates would actually drive down cash rents for example.

Why? Because the new conglomerate type farmer would actually have to pay interest on the $300 rent he pays in advance. Especially if he no longer has outsized taxable income to shield.

 

Most of the land valuation is the result of blindly making annual multi-Trillion dollar decisions to make the currency worthless. If you hold currency, anyone on the planet knows to get rid of it asap. If one studies the history of Europe you quickly realize that the price of land has virtually nothing to do with its earning potential. Since our policies are the same as Europe, a similar outcome is pretty well assured.

 

When the market finally overcomes the manipulation, and interest rates return to inflation + risk type returns, things will be different. Greece is a pretty good case study.

0 Kudos
Highlighted
Honored Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

And while we are on business strategy, anyone who buys inputs at the same time he sells the outputs (as championed so loudly by Iowa State and others) needs to do a little research. The price of inputs (seed, chemicals, fertilizer, land) are all positively correlated with the price of corn. Positively correlated means that they are high at the same time and low at the same time. So, a better business plan is to buy the inputs when they are cheap and sell the corn when it is expensive, this is SELDOM at the same time. P & K especially because you can apply more than needed if it was cheap, and delay applications for a few years when it is expensive.

0 Kudos
Highlighted
Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

Well now you guys are starting to go RSW here

Highlighted
Honored Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

If corn becomes $3, "cash will be king" those that restrained from buying that "cheap" neighboring 80 for $14,000/acre and new paint will be in the catbird seat.  If they needed to lower their taxes, spreading extra fertilzer (on owned land)may have been the wise choice, now they can withdraw from that bank.  

 

Some farmers are going to loath that schedule 179 rapid depreciation, if there are payments that have to be made on that machinery using after tax $3 corn they are in for lean times. I think cutting out the snake oils like fungicide and "refuge in the bag" seed, all those conveniences that might make things easier or on a good year might make and extra 5 bushels will have to be cut.  Yes the cornbore may take some, yes there may be a weed escape, but the economic threshold will have to be assessed.

0 Kudos
Highlighted
Senior Advisor

Re: We need to start a new Ag movement???? Mandatory 50% set aside

Jump to solution

BA -- If you cut - say your fungicide or the refuge in the bag - would you be taking a good chance at cutting your production ? I'm just saying - by maybe cutting production to save a buck - where would the savings be if you don't have it to sell ? - Sort of like a hog farmer that sells this sows to save money - where the's income with out them ?

 

Just asking

0 Kudos