What's the right debt load per acre

[Richard5]

With all the posts of Broadacre, declining grain prices and oil, just curious to everyone's thoughts on the right level of financing per acre.

Then to break it down further, what amount is current (cash advance, input financing, line of credit)

How much is right for mid term (5 to 7 year) on equipment. This would include leases as it is debt also.

And then long term

For me, most years its $13 per acre or less on 1 year, $78 on 5 year and $50 on long term

[BreadWinner]

I think banks always use the debt to equity ratio. The more you have the more you can borrow. I think a farm in the establishing or growth stage would have allot different numbers than one in "the always stay the same-inherited everything I have situation".

[freewheat]

No right answer.

[farmaholic]

$0.00/acre LOC or Op loan...just came out of some good times. Let's see what the future holds.

$80.00/acre 3-5 year term liability

$0.00/acre long term liability

Too much under utilized equity, but I'm full.
Did hobby call it lazy capital?

[Hopperbin]

Richard you could put that whole debt on your checking account over draft at the lowest rate. Why bother with long mid and what ever your talking about?

[seabass]

I would say 100 to 120 for 5 year loans. Depends on long term yields and avg prices for each farm. What your risk tolerence and long term plans for farm. Do u have another generation looking to take over. Lots of different scenarios.

[Richard5]

I could do that Hopper however that doesn't make a lot of sense unless you don't have a lot of debt which may be your situation

The interest rate is basically the same either way if securing it with hard assets

The problem with a large loc as you are suggesting is that its really supposed to be short term and not carry a large balance all year.

In addition, when times get real tough the next 2 to 3 years as I feel they are going to, you are refinancing to 5 to 10 year term debt anyway to give you some wiggle room to operate

[bgmb]

Depends where you farm(land price) and what your risk tolerance is/stage in farming.

[fjlip]

AgExpert benchmarking is easy...
any one else using it?
These are our ratios...
all fair market values...

Assets to liabilities= 29.6855
Liabilities to assets= 0.0448
Total Equity to total assets= 0.9552
Total Liabilities to Equity= 0.0469
Total revenue to total Assets= 0.1058

[freewheat]

Must be a nice, calm, comfortable, and secure era in ones farming career, FJ!

[farmaholic]

freewheat, when the Fjs of the farming world get to that stage, the tolerance for the bullshit gets extremely thin. Wanting to risk capital gets old. No longer blinded by ambition but jaded by a lifetime of some good and mostly questionably bad experiences. Realizing I don't need to do this...

[theplowboy]

when land prices are going up, low interest rates and decent grain prices I think you can be a little more aggressive and have a higher amount of debt.

we are pulling in the horns so to speak and trying to pay down some debt right now for a bit of leaner times ahead.

never a bad think to figure out how to lower your cost of production per bushel and per acre, interest payments can be a big expense on highly leveraged expensive land and as interest rates start to move higher.