How BTO's operate

[dave4441]

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Bit of an insight into how one large farm operates.

Does this even seem possible? Would be 50000 plus acreage fully financed at avg cost of $2500 per acre and I can't imagine any farm that has that high of avg land cost. Did they buy alot of land or is this really a credit agreement for future land purchases.

Interest at 6.5% would be $160 per acre on 50000 acres. Numbers don't seem to be lining up. Any thoughts??

[farmaholic]

Does this even seem possible? Would be 50000 plus acreage fully financed at avg cost of $2500 per acre and I can't imagine any farm that has that high of avg land cost. Did they buy alot of land or is this really a credit agreement for future land purchases.

Interest at 6.5% would be $160 per acre on 50000 acres. Numbers don't seem to be lining up. Any thoughts??

The mortgage may be attatched to more than farmland. I doubt the interest rate would be 6.5%(that seems a bit high). If all they ever bought was high end(soil class A,B,C) land I can see there average land cost being high. Some "Agriville talk" quoted prices are astounding.

Too many assumptions made with too little information. All we saw was a title to one quarter with a mortgage lien on it. There is a much bigger picture to see but we've only been shown a tiny piece of it. Aren't these guys really spread out over a long distance and who knows what kind of infrastructure is tied in.

[RedLentil]

I personally know this particular BTO. It is a very impressive operation, approx 120,000 acres. The owners, in my opinion, are top notch respectable guys. This farm started from basically nothing Around 10years ago. It is still a bit of a mystery as to how they pulled this off but they show no signs of slowing down. I can't say I feel the same way about all BTOs but these guys have my respect.

[Horse]

My personal experience of those who think they can control the world just drive the price out of reach to the average Joes then in a few yrs and some hook and crook they disappear leaving an awful lot of small creditors holding the bag, there has been quite a few deals around me where someone has paid more than they should have and 5 or 10 yrs it is in receivership then its to late for me to pickup because you lose a lot of pep in 10 yr. And we pay to cover losses to suppliers.

[LEP]

I personally know this particular BTO. It is a very impressive operation, approx 120,000 acres. The owners, in my opinion, are top notch respectable guys. This farm started from basically nothing Around 10years ago. It is still a bit of a mystery as to how they pulled this off but they show no signs of slowing down. I can't say I feel the same way about all BTOs but these guys have my respect.

If they are 120,000 acres, something doesn't add up regarding seeding and combine power. 14 combine and 9 seeders isn't enough.

Anyway, regarding the $126m figure. They likely have a fixed and floating debenture to secure all borrowings. So that $126 might be broken down into $25m on operating, $40m in equipment debt, $ 50m in land debt all broken down with different repayment schedules and amortization terms, but secured by the master facility on land, buildings, equipment, grain, and everything. Likely it was written up for an amount larger than actual borrowings to allow for future expansion.

I did a couple of these when I was banking. They were expensive to put in place , but offered the best security for the bank and therefore you could get the best rates. I bet these guys paid 2 or 3 million for bank, legal and registration fees alone.

Once in place you pay down and get new advances on the existing security without reregistration. So save some there. Probably at or slightly below prime.

[bobofthenorth]

I personally know this particular BTO. It is a very impressive operation, approx 120,000 acres. The owners, in my opinion, are top notch respectable guys. This farm started from basically nothing Around 10years ago. It is still a bit of a mystery as to how they pulled this off but they show no signs of slowing down. I can't say I feel the same way about all BTOs but these guys have my respect.

Me too. I've seen BTO's come and go but these guys are real. They grow good crops and they get the work done on time, good years and bad. Very impressive and from my limited knowledge no signs of slowing down.

[Daylate]

What percent land do they own of the 120,000 seeded acres. $1050/acre of a rolling loan seems like a number that would be hard to float in a down turn of commodity/land prices. @ 4% interest average over it all would be $42/ac. I would think people that farm in these areas could compete with this farm if they wanted.
They dont farm near us so dont know them really. But don't think I'm built for that kind of success. Made me tired just reading about their farm, lol. Good luck to them. They could be creating wealth for people all around them in the end that we are missing in this area, dunno.

[SASKFARMER3]

LEP summed it up perfectly.

Again it’s borrowed money so who cares.

Bank is so protected not even funny.

Good luck Mother Nature is a Bitch

[dave4441]

I personally know this particular BTO. It is a very impressive operation, approx 120,000 acres. The owners, in my opinion, are top notch respectable guys. This farm started from basically nothing Around 10years ago. It is still a bit of a mystery as to how they pulled this off but they show no signs of slowing down. I can't say I feel the same way about all BTOs but these guys have my respect.

I don't know them and have nothing against them. Everyone is entitled to do what they want, although i find it very interesting that anyone can stomach that kind of risk. Couple crop insurance wrecks and the operation is toast.

My understanding is they are backed by machinery dealer money. I believe the lead was selling machinery as little as 5-6 years ago.

[Oliver88]

I think LEP's explanation makes sense and likely is considering he said he formerly was a banker.

By the way Does anyone know if ISC allows the title to be pulled on city lots?

[SASKFARMER3]

You pay for it any thing is available

[sumdumguy]

I think LEP's explanation makes sense and likely is considering he said he formerly was a banker.

By the way Does anyone know if ISC allows the title to be pulled on city lots?

I think city lots are fair game with ISC, can't see why not.

[Richard5]

I personally know this particular BTO. It is a very impressive operation, approx 120,000 acres. The owners, in my opinion, are top notch respectable guys. This farm started from basically nothing Around 10years ago. It is still a bit of a mystery as to how they pulled this off but they show no signs of slowing down. I can't say I feel the same way about all BTOs but these guys have my respect.

Call me old fashioned but I cannot understand the "impressive" part, especially when I see the level of debt negotiated.

From the road it may look impressive but in reality, internally is it actually impressive? Sure, lots of nice equipment and professional made video's for you tube but at what cost? At the end of the day, my suspicion is now proved and this amazing farm is no longer amazing. Its all false money. Any one of us could do something similar to this if all we want is to look impressive

From a tax perspective, a farm like this, no matter what kind of joint venture corporate structure will have limited if any, small business tax rate. This to me makes it even tougher to compete with 26.5% tax rate on any earnings reported. Unlike a 2500-3000 acre farm that works really well for a business limit of 500k.

The day of reckoning is coming for operations like this, in my opinion

[SASKFARMER3]

I’m sitting in 28 above temps the last three weeks and this makes me think why the f&@k would any one in their right mind want to be this farm.

Is it a challenge to see how big you can get with borrowed money. Why life is to short and farming in canada is to risky.

The west did good because we flooded that’s all it boils down to and now with normal weather why put your self at risk.

Better taking the 100 mill and buy a bunch of Tim Hortons or Costco’s etc more money and less risk.

[farmaholic]

Re: pulling titles.... go ahead, pull some Ghetto titles, I'll tell you what you'll find if you pick the right ones....mortgages on some covering a "quick loan" which has NEVER been used and a "line of credit" I don't know the last time we used. Things don't always look as they appear. In fact the amount of appreciated land equity securing those unused loan instruments is stoopid. But they're left in place....just in case....some unsuspecting niave widow wants to sell her land! I hope you guys realize I'm joking with that last part....or am I? 🤡 what a clown!