scout said:
burnt said:
Similar to what a speaker once said at a producer's meeting - "The average market price is equal to the average cost of production".
Seems logical, but he did not say how subsidies affect the equation. Likely just drops the average market price without changing the cost of production. So the one who knows how to work the subsidy system the bests wins?
I agree seems all the suabsidlies do is go to the land owner in higher rent around here.already see pasture rents going up around here do to higher cattle prices but have noticed some young guys jumping into the feeder market more money selling corn through beef than to the elevator .
The days of cheap grass rent are over. The grass I have will stay grass as long as I'm alive. After that, all bets are off. So much grass here has disappeared under the plow that good grass is a rare commodity. But the taxes on that grassland has skyrocketed. Nobody here, farmer or rancher is buying pasture land with the intent of keeping it in pasture...they have what I call "corn fever".
The problem is, ranchers have been able to rent grass cheaper than they could own it. That's great if you are renting, but not so great if you are the owner. If you were to buy 160 acres of grass at $2000/acre, that's $320,000. Suppose you had $160,000 of your own to help pay for it. Borrowing $160,000 @ 5% is $8,000 just in interest. If your banker was feeling generous, he might pay you 1% on your $160,000 that you used as a down payment. There's another $1600 that it cost you to own the ground. So you have $9600 tied up for the year. Throw in close to another $2000 for property taxes on that quarter and you have $11,600 tied up in owning that piece of ground for the year. $11,600 divided by 160 (really only 156 usable acres if you want to get technical) is north of $70/acre for rent just for the owner to break even, if he bought the pasture to generate income. $50/acre pasture rent won't cut it anymore. I'm going to charge my tenant $60/acre next season, and after clearing cedars and some new fence is put in next summer, the rent will probably go to the $70/acre for 2015. I guess if he doesn't want it at that price, somebody will.
Before you renters crucify me, put yourself in the owner's shoes first. Would you want to rent grass for $50/acre when it cost you $70/acre just to own it?