What are Guys Seeing?

[furrowtickler]

I've had guys that own land tell me that cash rent has to be worth at least 5% of market value...

Their argument is that if they were to sell the real estate, they could put it in the market and make 5%. Ok, great, then go ahead and liquidate it and put your money elsewhere! Just because an investor would buy it off of you for $1500, doesn't mean rent should automatically be $75/ac does it? In all reality, if all you are concerned about is your 5% ROI, then perhaps rental should be free as many years around here you are gaining greater than 5% just on the capital appreciation.

Trouble is, there are enough guys around that yap at social functions about how, "if anything were to come up for less than $70/ac I'd take it all!" They must have FAR SHARPER pencils than I do, and I think I run a pretty tight ship. Equipment is all paid for, living expenses are bare bones, and I do ALL my own repairs, crop scouting, agronomy, etc...

If there was $75/ac in it, dependably every single year, I'd be buying all the $1500/ac land I needed to make a comfortable living...

Lol , if they want 5% , they should sell out .

[Hay Farmer]

What could you possibly grow on that land to make any kind of return....whether you had the money or not?????

Yea it really doesn’t make much sense now. It is good land in this area, 100 bu wheat, 110 barley, 60 canola aren’t uncommon but it still won’t make the land payment or barely make it when the payment is over 30 years. The land was selling almost as quick as it came up but there is a few for sale signs staying up a while now.

[bigzee]

If I was getting offered a ridiculous price I couldn’t really give a rats ass what they plan on growing to make it work.
As long as the cheque clears that’s all I really care about.
As Steve Miller sings ..... “Take The Money 💰 And Run”.

[fjlip]

South of Red Deer land has gone from around $500000 per quarter five years ago to $900000 for some quarters now. Whether it is landowners cashing in at these high prices or poor economics of farming lately, this year there is suddenly a lot more land up for sale.

Lucky them, who cares what new owner does, enjoy the windfall!

[Richard5]

You hear crazy debt numbers. I just hope someone is helping the guys with land debt in excess of 1200-1400 per acre. Often these farms have all equipment leased so that would add to the total.

When banks say no, and it strokes your ego, why keep buying? I think Fcc has a cap of 30 mill per farm. Once over 15 mill of debt or equity combined you no longer have a low corp tax rate so that works against you also.

I don’t understand how someone can sleep with numbers like this if what one hears is actually true

[Taiga]

I think the thought process behind debt numbers that are crazy high is that it is no longer personal and you just walk away if it all crashes; with large numbers it is the financier who is the one losing sleep.

This is a good article about John Buhler and his views on debt:
https://www.producer.com/2007/02/farm-equipment-tycoon-shares-buhler-logic/

[Flatlander]

Have an FCC rep that visits me twice a year, for a while I wondered what it was all about, I have little debt and has been paid on time. He said it’s his job to see clients twice a year, just that simple. Last time out I asked him if they ever say no or if you can just load right up on debt. On machinery he said they do say no occasionally only for the farmer to get the financing thru the dealership.

[farmaholic]

There's always Input Capital..... where you can mortgage your future canola crops for today's "cash flow" and "purchase capital" needs.

Nothing wrong with manageable debt though.

Ever hear of negative equity in land and machinery like there can be passenger vehicles? Wouldn't that be something.

[GDR]

Lucky them, who cares what new owner does, enjoy the windfall!

I'd bet the land market value per farm or individual is similar to different areas but size is not. Most on here seem to be from SK, I laugh when you guys classify farms as BTO vs STO. For the most part all us here with that high priced land are all STO, partly because of costs of acquisition and partly because our season being a bit more limited. A big farm here might own a couple sections vs some areas might be a whole township.