Markets down again!!

[tstep]

If these markets keep going the way they have been it will be cheaper to smf everything. Fk it. Only need the sprayer.

[Partners]

Canola price is a insult to farmers..Why not just make it zero...I am sure no one is selling at these prices any way..

[farming101]

5-10 percent drop from here certainly in play.

Seeding conditions may turn things around. As
long as you aren't ground zero for a 2016 drought.
Lots of time yet.
An ounce of patience is worth a pound of brains.(Read that somewhere today)

[binthere]

wait until canola is only $6.00/bushel. ouch.

[Richard5]

I don't think the sky is falling just yet but am curious as the thoughts of some that are in different situations.

How much debt is too much (on a per acre basis including land, equipment, operating and lease debt) - Lease debt included since its still debt on a piece of something you carry the insurance on.

$300 plus per acre - Which I think is getting too high already

$500 per acre - 1 year away from the auction

$800 per acre - Not sure if anyone would get this insane or if banks or FCC would lend to this level but at this point I don't think its physically possible to operate.

Depending on your financial position, this market change impacts each one differently.

For me, I am still old school where I don't borrow unless I have saved up the old 25-35%.

I think lenders of today will bend over backwards to get you the money. This alone will be a large contributor to many operations

[binthere]

if you are less than 60% debt to equity your hooped. old banker adage.

[iceman]

Richard, I'm not sure if that's the best way to look at it. There is a big difference between equipment debt and land debt.

Ie someone with 300 per acre mostly in equipment debt and equipment leases with be insolvent long before some with 300 mostly in land debt because of the repayment terms.

Probably the better one to look at is current account ratio. Current assets to current liabilities. It better have been growing the previous 4 yrs because it's bound to decrease in the next few.

Working capital is king now in this environment. FCC with their buy now pay back in March 2017 will be the first to feel the pain and they got the young guys sucked right in

Ice Out

[Richard5]

I can agree with one of your points iceman but not the current ratio one

Current ratio doesn't mean much in today's world

Working capital definitely. I refuse to let my working capital fall below 100% of next years operating cash needs.

If it does, absolutely no capital expenses and me and the family need to live a bit lean for the year.

As to binthere's comment on 60% or less debt to equity, if FCC keeps lending at values of what land is trading for, what common sense is that and are we not setting producers up for an 80's thing again?

I often wonder what land would be worth if 10,000-20,000 acres went up for sale/rent in an area because a couple guys go down?

Maybe I am too conservative or don't like risk that's beyond reasonable

[iceman]

That's the issue with debt to equity ratio

Raising tides raises all boats. And when the tide goes out people stand naked


Ice out

[farmaholic]

I think there are too many people operating on the edge.....cheap easily accessible money.

Holy crap R5.... if someone paid $2000/ac for a quarter and borrowed 300k. It would put 5.5 quarters plus the one you just purchased about $300/acre in debt. It doesn't take much. Then there's iron debt and (for some) LOC or OLs...

Grain farmer's should have their head read.

How many Producer's could "take a year off" with the commitments they have? Alot are in the worst possible place they could be. And unfortunately, to me, that means lacking power. Cash flow is KING on many operations with no cushion. These guys have to be astute marketers so they aren't selling at the worst possible times. In fact it probably makes them better marketers....

Is there one more good year for lentil and mustard prices beyond what has been contracted? Well wheat is the dog it always is. Canola is so ****ing expensive to grow. Soybeans arent well suited Prairie wide. Flax? Yellow peas versus greens.

Chasing high prices "might" mean you're a year too late.

Following that rainbow to the pot of gold at the end might be disappointing when you get there to find too many others were there before you,..currently and a year ago.

Zig when everyone else Zags.

So suck it up and pay for the inputs,..roll the dice,...and take whatever the market gives you. Like us last year, you may realize the market may not provide a price with the given yeilds to make every acre profitable. But that is my problem!

Good luck everyone....Vegas, what a joke!

[Partners]

Some guys are not worried about debt..

Hergott's sold the first BG 100ft air drill and 1300 bushel tank ..

Retail--$1.25 million..

[iceman]

Partners,

If that was in Alberta it would be all cash deal

Ice out

[hobbyfrmr]

There is a lot of cash on a lot of farms. Think of the 5000-20,000 acre farms, paid for, selling at good profits for 3 years straight. Big time cash.
They are buying more land, building mansions, and and machinery than ever. Money is not a problem on some farms.

[Partners]

Maybe some..But in this area, none of the large farms are old enough to be paid for...

[Richard5]

I'm just throwing it out there farma

I agree that i think too many are getting way too far in debt for what they can handle and all for the wrong reasons - they never get turned down for more loans, leasing, or the worst, those damn farm input credits

No matter what age, i would be very worried if i had more than 300 per acre debt at any one point during the year. If its only on land, then less issues but possibly a concern