AgStream

[lesm]

Does anybody know Gary Pike's history or background?

[Steve_Winkler]

I have a landlord trying to get me to do a similar rental agreement. My lease on the land expired this past crop year and this is very similar to what he's proposing. 50/50 split of everything, all costs, all revenue. The main thrust of this deal was for he and his wife to maintain farmer status ( tax & capital gains issues)and was discussed well before the big jump in prices. In my opinion it wasn't meant to be a money grab but it may turn out that way.

I'm not thrilled about the deal in light of the dramatic rise in commodity prices, but I need the land base as well.

Any thoughts, suggestions as to how I should proceed??


Thanks,

Steve

[IAMTHEMOLE]

grow barley on that piece

[Hopperbin]

Steve not sure, you worked hard up to now. You said discussed not agreed upon. Too bad contract not sealed yet. I would try to hold tuff if no contract yet.
Then again in my area I don't have a neighbour that would take land away from me. I have neighbours that crop share but don't keep grain separate just pay cash as estimate of crop share. Takes a lot of trust to do that. But that does not solve the problem of the renter wanting actual grain checks. Guess this is a whole another topic.
Back to getting 70 percent of 150dollars of inputs paid up front only to give half of 35 bushels per acre average crop back at 13 dollars per bushel equals 227.50 paid back costing basically 77.5 per acre for a 105 dollar cash advance. Lifer you are right negotiation on the part of the farmer would be in order. Perhaps AgStream drew it up based on lower canola prices.

[Hopperbin]

I remember a topic a while back about how an end user could guarantee supply. Doing as AgStream is proposing could be a good way of securing that grain. By spreading acres over a wide area reduces risk.

[SASKFARMER3]

This article just really pssed me o--. Some one is going to give you some money for half your crop, go get a spring interest free Cash advance and you keep the grain for your farm.
Makes me think of another example the Outstanding young Saskatchewan farmer award. The guy this year sold all his property and rents it back. HM that's a genius. He just became a worker for a wage, His kids will never farm and he will quit on the next turn down. But that's another topic.

[agstar77]

Some people scoffed at the idea that farmers could become serfs again. If these type of plans fly , serfdom is only a step away. If Agstream succeeds wouldn't it be logical for someone like Cargill to buy in? We have seen it in the hog industry, just takes a little longer in Grains.

[Jay-mo]

Good point agstar. The hog industry for farmers has largely become one where the Maple Leafs, Hytek, Big Sky, Puratone etc take on most of the risk and contract out the raising of their animals to individual farmers.
I have a custom hog feeder contract with Maple Leaf. Its been a good thing as part of our grain operation. When the hog prices are bad I dont have to worry . When prices go up, well it makes not alot of difference.
For my farm its been a good way to minimize risk. However, the flip-side is that there is no big up-side potential with this kind of arrangement.
I cant imagine not owning half the grain in my bins during this recent rally. At the same time during the past couple years when we have seen 5$ canola who wouldnt feel alot better having a big chunk of their inputs already paid for?

[charliep]

Won't comment on the offer. Having said that, how should new farmers enter the industry? If you were starting your business today with limited funds (I will assume something less than $500,000), how would you do it? Is there a need for venture capital (someone willing to assume some risk but expecting a higher pay off) in Agriculture versus straight secured debt?

[Lifer]

Are there people afraid of non farmer investment in agriculture?

[Ron]

"I'm not thrilled about the deal in light of the dramatic rise in commodity prices, but I need the land base as well."


Steve, was it an acceptable deal when canola was $10/bu and you would split 100/ac (30 bu@10 minus 200/ac inputs)? Now that canola is $15/bu you will split 30 bu@15 minus 200/ac, 250/ac.
You will still make more money from this rally, just not as much more as if you were able to stay with straight cash rent.
Unless you are sure there is no competition for this land you will probably have to go with his deal. Have you shown him the numbers if we get a killing frost in mid august?
It seems when prices are high the discounts get pretty big for #3?

[IAMTHEMOLE]

I think the plus for the young under capitalized who could gravitate to this Agstream deal is if there is a crop failure. All of a sudden 150 dollars cash/acre in your jeans don't look to bad, especially if you do not presell canola. From the other side where else can an outside investor buy canola for 8.57/bu, but only if the production hits 35/bu/acre. $150/17.5 bu.