Is Farmland The Next Asset to Collpase?

[Ben H]

I could have probably put this under Political, maybe, but I think it's appropriate here. This comes from Allan's Blog
http://www.wincustomersusa.com/stockman/

Is Farmland The Next Asset to Collpase?
Monday, 13 October 2008
Will farmland be the next asset to dramatically fall in price? Cash corn prices in the Midwest are now down to $3.50 a bushel and soybeans are at $8.00. At these prices, it takes at or near 100 bushels of corn just to pay the cash rent on top quality Iowa farmland. This means renters are in a real financial wreck considering the high price of other production inputs. In Argentina where farmers are currently facing these new low prices at planting, we have seen farmers abandon cash farmland leases and pull back into their deeded acreage. So far, farmland prices there have not fallen there but leases are going begging. I suspect we could see the same thing happen in the Midwest this spring. Farmland has already seen one price prop, exurbanization, removed. A dramatic drop in cash rents would set farmland up for severe price declines in 2010 and 2011 as investors exit. Unfortunately, due to the current banking crisis the exit window for cashing in on the recent price runup may have already closed.

 

[Big Muddy rancher]

That maybe what's needed to get land prices in line with productivity. :?

 

[mytfarms]

Well, good news for me as I start to try and put together some dirt.

 

[Carnes Lake Cattle Co]

I just came home from looking at a place for lease down the highway from me. The gentleman offered me to lease it for 250,000 per year or I could buy it for 22.5 million dollars. We might could put 90-100 cows on it after we fenced and replanted the place at our expense. As was said untill land prices and lease fee's come down, I can see alot of leases being turned in.

 

[Big Muddy rancher]

I just came home from looking at a place for lease down the highway from me. The gentleman offered me to lease it for 250,000 per year or I could buy it for 22.5 million dollars. We might could put 90-100 cows on it after we fenced and replanted the place at our expense. As was said untill land prices and lease fee's come down, I can see alot of leases being turned in.

:shock: :shock: :shock: :shock: :shock: :shock:

What are some people thinking. :roll: :roll:

 

[Mrs.Greg]

I just came home from looking at a place for lease down the highway from me. The gentleman offered me to lease it for 250,000 per year or I could buy it for 22.5 million dollars. We might could put 90-100 cows on it after we fenced and replanted the place at our expense. As was said untill land prices and lease fee's come down, I can see alot of leases being turned in.

For 150,000 a yr you could rent our pastureland,it will easily hold 100 head....great deal I'd snap it up!!!!!!!!!!!!!!! Fast like TODAY!!!!



BMR....I totally agree with your statement:
That maybe what's needed to get land prices in line with productivity.

 

[Yanuck]

I just came home from looking at a place for lease down the highway from me. The gentleman offered me to lease it for 250,000 per year or I could buy it for 22.5 million dollars. We might could put 90-100 cows on it after we fenced and replanted the place at our expense. As was said untill land prices and lease fee's come down, I can see alot of leases being turned in.

:shock: :shock: :shock: :shock: :shock: :shock:

What are some people thinking. :roll: :roll:

Helloooooo! they're from GEORGIA!!!!!!!!!!!!!!!!!!!!!!!!!!!! :wink: :wink: :wink: :wink:

 

[Big Muddy rancher]

I just came home from looking at a place for lease down the highway from me. The gentleman offered me to lease it for 250,000 per year or I could buy it for 22.5 million dollars. We might could put 90-100 cows on it after we fenced and replanted the place at our expense. As was said untill land prices and lease fee's come down, I can see alot of leases being turned in.

:shock: :shock: :shock: :shock: :shock: :shock:

What are some people thinking. :roll: :roll:

Helloooooo! they're from GEORGIA!!!!!!!!!!!!!!!!!!!!!!!!!!!! :wink: :wink: :wink: :wink:

:lol2: :lol2: :lol2: :lol2: :lol2: :lol2: :lol2: :lol2: :clap: :clap: :clap: :cowboy:

 

[kolanuraven]

I just came home from looking at a place for lease down the highway from me. The gentleman offered me to lease it for 250,000 per year or I could buy it for 22.5 million dollars. We might could put 90-100 cows on it after we fenced and replanted the place at our expense. As was said untill land prices and lease fee's come down, I can see alot of leases being turned in.

For 150,000 a yr you could rent our pastureland,it will easily hold 100 head....great deal I'd snap it up!!!!!!!!!!!!!!! Fast like TODAY!!!!



BMR....I totally agree with your statement:
That maybe what's needed to get land prices in line with productivity.

Depends on the acreage but land prices in GA , most of you would not believe it if I told you.

The funny thing is that most of it in my area DOES have gold under it!!! :wink:


<< But you'd spend a friggin' fortune trying to get at it :lol: :lol: :lol: >>

 

[feeder]

Here in NW Iowa land was selling for $10,000/acre a month ago. Now there have been land auctions in the area that are getting 5000/acre for top bid and they are being no saled.

 

[bverellen]

What is meant by land being priced to it's productivity?

I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.

TIA

bart.

<///><

 

[Carnes Lake Cattle Co]

With that offer me and my wife were thinking of selling our place. we could buy a house in town and live pretty well.

 

[Big Muddy rancher]

What is meant by land being priced to it's productivity?

I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.

TIA

bart.

<///><

Productivity to me means that the land might someday pay for itself.

 

[rancherfred]

What is meant by land being priced to it's productivity?

I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.

TIA

bart.

<///><

The last pasture land sold in our local area for around $450/ac. Current cash rents for those doing it that way are $8-10/ac. At the $10 level it will take 45 years just for the land to return its principle. That is not counting any property taxes, maintenance costs or interest on the loan. Land priced like that will never, ever be able to return anything to the owner but the pride of ownership. The only thing that can justify that price is easy money or a tax write-off.

I figure, and others time line may vary some, that you ought to be able to at least break even by the ten year mark. If you can't do that then the investment is probably pretty poor. If my memory is correct you can double your money in 6 years at 5% interest.(Somebody correct me if I am wrong on that)

 

[Denny]

In this day and age if you have'nt inherited land you will be able to buy some but not every acre you need.Land in our county now will be taxed recreational if it is'nt actively used for agriculture.I lease alot of ground from people who bought it cheap and use it for hunting and weekend retreats to me it's a win/win.No matter what anyone thinks we don't truly own the land we just have the honor to be stewards of it for a short time.I hope it drop's in price it has shot up so fast that only the well to do can afford it and in my opinion thats not right,but money talks and we no the rest.

 

[Soapweed]

What is meant by land being priced to it's productivity?

I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.

TIA

bart.

<///><

The last pasture land sold in our local area for around $450/ac. Current cash rents for those doing it that way are $8-10/ac. At the $10 level it will take 45 years just for the land to return its principle. That is not counting any property taxes, maintenance costs or interest on the loan. Land priced like that will never, ever be able to return anything to the owner but the pride of ownership. The only thing that can justify that price is easy money or a tax write-off.

I figure, and others time line may vary some, that you ought to be able to at least break even by the ten year mark. If you can't do that then the investment is probably pretty poor. If my memory is correct you can double your money in 6 years at 5% interest.(Somebody correct me if I am wrong on that)

I think it is more like you can double your money in ten years at 7%, or double your money in seven years at 10%, with compounded interest.

 

[rancherfred]

Thanks Soap, I couldn't remember which one it was. The point is still pertinent that land at those prices is a terrible investment.

 

[pknoeber]

What is meant by land being priced to it's productivity?

I've heard this mentioned before as to what ag land used to be worth before all the folks from the cities started driving up prices.

TIA

bart.

<///><

The last pasture land sold in our local area for around $450/ac. Current cash rents for those doing it that way are $8-10/ac. At the $10 level it will take 45 years just for the land to return its principle. That is not counting any property taxes, maintenance costs or interest on the loan. Land priced like that will never, ever be able to return anything to the owner but the pride of ownership. The only thing that can justify that price is easy money or a tax write-off.

I figure, and others time line may vary some, that you ought to be able to at least break even by the ten year mark. If you can't do that then the investment is probably pretty poor. If my memory is correct you can double your money in 6 years at 5% interest.(Somebody correct me if I am wrong on that)

I think it is more like you can double your money in ten years at 7%, or double your money in seven years at 10%, with compounded interest.

It's the rule of 72. Take 72 divided by the return and that gives you the number of years (approximately) that it will take to double the investment.