ridiculous profits

[hardnox604008]

I'm thinking we can still expect our 10 yr APH in corn although potential is quite a bit higher than that. beans are unknown at this time but APH seems as possible as not.

Plugged APH and my sales price into the FarmDoc crop budgets and came up with $300/acre clear net on those yields and prices.

I'm sold to 75% RA levels. If I put in the insurance threshold yields I make $60/ acre on this plain vanilla corn/soy rotation. For most of the '80s,  '90s and first half of the 00s there were more years than not that I would have killed for $60 free and clear.

I guess it is a problem of some sort if my neighbor makes $400 and I only make $300 but quite honestly I am just not going to worry about that.

A guy farming 10,000 acres might have costs $100/acre higher than me but he nets $2 million under those circumstances.

We, or they, are probably lucky that nobody in Washington understands this stuff anyway, that is when the Farm Bill comes up.

[hardnox604008]

And make no mistake about it, the guy farming the 10,000 acres and making $2 million is going to try to beat me over the head with his billy club for the next 30 years.

Maybe just rent to him for $400/acre on a ten year contract?

[Jim Meade / Iowa City]

If you get the rent money up front it might not be bad, but where are you going to put it and what if we get double-digit inflation?  Oops, better get a couple of attorneys to put some nice clauses in the contracts.

There were high profits in ag during the Civil War, around WWI and after WWII.  We'll live through high profits.  The actual profits might be higher than projected because with the average age of the farmer at 55, you have to figure a lot of land is paid for and although it's charged against the balance sheet, it's really money in the pocket.  Makes you want to muy more land, eh? 

[hardnox604008]

If there is hyperinflation then he will have won the bet.

I was musing over whether it would be wise to take the other side. My guess is that yes it would be but you are right, you do have to examine the implications of being wrong even if it is assigned a lower probability.

Also, if you get double digit inflation you still own the land even if the income flow is capped for 10 years. 

 And I'm having a hard time seeing interest rates remaining at 0 and I don';t think a debt saturated world does very well when actually having to pay something for debt service.

BTW, the present value  factor for 10 years at 3% is .744 so I would take $2967 up front.

[hardnox604008]

Of course I don't know the future any more than anyone else does.

I was being a bit sarcastic in the initial suggestion but not entirely.

It would sort of be like puttting my best suit and sincere look on and going to a million dollar lottery winner to try to sell him a million dollars worth of lottery tickets.