grassfarmer, I agree with whiteface in this one. I do not believe you will be able to find decent grass in central Alberta on a sustainable basis for less than a dollar a day. I believe you are mistaken when you say prices will drop because of supply demand forces. The fact is that those forces are not in play here.
As Whiteface said, the farmers who are renting their summer grass will not do it for less than a buck a day. I wouldn't either because it is simply not worth the hassle of having a renter on the place. I don't believe you will ever see the land for less than that and you will be waiting for a long, long time for land rent to decline below that. Most guys, like myself, would rather see the land idle than just get a pittance for it.
I also agree with Whiteface that it is land values that will force people out of the cattle business. In fact I have already seen it with many of my neighbours who have given up cattle, sold most of the land, and are having a very nice life on a piece of land with a couple of cows. It is not, as you said, that these people paid too much for their land-rather the opposite, they made a wise investment when land prices were low and are now selling out and retiring now that land prices are high. They are, in a sense, being forced out of cattle, by the high current land prices and the new owners are certainly not cattlemen.
Grassfarmer, like any businessman, you have to examine your return on assets. If you bought your land for $200,000 and it is now worth on the market $800,000 and you are earning $40,000 a year from your cows that may have been a 20% return on capital when you invested in the land but it is now just a 5% return. Now you can quibble about the figures and tell me how you are renting cheap land and grazing your cows all winter if you want but the fact is, as poor boy said quite well, that you are earning a 5% return on your investment (land) and you could do that without the work by putting your money in the bank.
The future of ranching, as always, lies with the operation being based far from expensive land, with cheap cows on lots of cheap land and with cheap feed. It's always been that way and always will be. CS Wilson has it right I think.
kpb
As Whiteface said, the farmers who are renting their summer grass will not do it for less than a buck a day. I wouldn't either because it is simply not worth the hassle of having a renter on the place. I don't believe you will ever see the land for less than that and you will be waiting for a long, long time for land rent to decline below that. Most guys, like myself, would rather see the land idle than just get a pittance for it.
I also agree with Whiteface that it is land values that will force people out of the cattle business. In fact I have already seen it with many of my neighbours who have given up cattle, sold most of the land, and are having a very nice life on a piece of land with a couple of cows. It is not, as you said, that these people paid too much for their land-rather the opposite, they made a wise investment when land prices were low and are now selling out and retiring now that land prices are high. They are, in a sense, being forced out of cattle, by the high current land prices and the new owners are certainly not cattlemen.
Grassfarmer, like any businessman, you have to examine your return on assets. If you bought your land for $200,000 and it is now worth on the market $800,000 and you are earning $40,000 a year from your cows that may have been a 20% return on capital when you invested in the land but it is now just a 5% return. Now you can quibble about the figures and tell me how you are renting cheap land and grazing your cows all winter if you want but the fact is, as poor boy said quite well, that you are earning a 5% return on your investment (land) and you could do that without the work by putting your money in the bank.
The future of ranching, as always, lies with the operation being based far from expensive land, with cheap cows on lots of cheap land and with cheap feed. It's always been that way and always will be. CS Wilson has it right I think.
kpb
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