Land Rent

[WoolyBear]

Maybe these renters are hoping on a share of the surface lease monies from the oil companies........ or maybe they have a first option to buy, and then get it all. But in most cases I think its just coffee shop talk that gets the rent up as high as cowman says. Another fish story maybe?

[cowman]

No fish story. The land around here never stays unplanted. The neighbor has been pondering renting out his land this year and the phone has been ringing off the hook!
This area has a lot of old families who own the mineral rights and literally they couldn't spend the money in one hundred years. Cash rents are still right in that $60/acre for grain land and $80 for decent hay.
It isn't excessive at all when you realize land sells for $3,000/acre here? $60 acre is what... about 2% return? Not very good.

[cowman]

Also consider in this area we have a large number of European farmers coming in? $3,000/acre is incredibly cheap land in their eyes? Land in Holland typically sells for $100,000/acre or more...if you can find it!
Of course coming from developed countries they have no interest in living in the sticks and prefer to be close to a decent sized city. They see this country as a great land of opportunity for agriculture? They see rental rates and land prices as a virtual fire sale here?

[Ron]

Cowman is right?
canola
seed 30
fert 48
tua/chem 24
custom seeding 13
insurance 15
land cost 65
harvest cost 15
fuel 5
$215/acre cost
40 bu (easy average here) @ $6 (Agricore nov 2006)
$240 gross
$35/ac net
The $60/ac rent is alive and kicking in central alberta (I dont like it but)

[lakenheath]

Ron your pencil is dull.

Where is depreciation per acre?
Where is interest expense per acre?
Where are repair bills per acres?
Where are maintenance costs per acre?
Where are living costs per acre?

You are one of those farmers who's pencil gets them in one hell of a mess.

[WoolyBear]

Yes cowman its oil money that ruining this damn country. Those that have it, are pushing the land costs out of reach of those that don't. Is it any wonder that young farmers are leaving when they are up against Jed Clempet and his oil barrel? At the same time the cost of that same barrel of black is running most everyone else that needs it into the red.

Just remember when its gone..... its gone.

And yes..... your machinery costs, depreciation, interest cost, etc are either not listed, or too low.

[cowman]

lakenheath: Of course you are totally right that all those costs must be taken into account for the total profitability of a farm. But you did say how can guys justify one extra quarter at these high rents?
And lets face it the guys renting land are usually running a fairly decent sized operation and adding one more quarter is like nothing? Maybe they shouldn't be doing that sort of thing but the fact is they do?
It all depends on how you look at it? And without a doubt many times it really has nothing to do with money but more with wanting to be the biggest dog on the block?
I don't think I ever said it was the smart thing to do? And personally I'm not real keen on working for fun or status or something, but you need to realize their are people who will and hey, it is their dime? I do understand how frustrating that must be for a young man trying to get ahead and without a doubt this is not an easy business...even in the good times!
I will tell you, in my lifetime, I passed up some opportunities to buy land that I dearly regret today! But then at the time I never had any money and it just didn't pencil out no matter what! Today looking back on it I look like the biggest idiot in the world...but who can see the future?
Bottom line in any business venture is do your homework and look at things like your darned banker would? Realize that sometimes you have to take a chance and roll the dice, but never do it with rose colored glasses on!

[cowman]

Wooley bear: Oil and gas aren't ruining the country. In fact I might suggest to you that is what is keeping a lot of people going? I would also note: that same oil and gas is letting a lot of farmers retire with a decent nest egg and able to either sell at a decent price to the kids or cut the neighbors kid a deal?
You shouldn't smear the one commodity that is basically keeping Canada afloat?
Don't blame oil and gas wealth with driving up farmland prices...put the blame where it should be...easy credit from Farm Credit and the various provincial loans and loan guarantees to banks?

[Ron]

Lakenhealth
1. custom seeding
2. cwb int free spring advance
3. no living cost as it is extra land
4. 15$/ac with an old combine includes repairs (there is no depreciation left). You dont need a JD 9650 to harvest 1000 acres. A decent mechanic can keep an older unit running cheaper than you shiny green guys would believe.

[Ron]

Ron I don't know if you wrote this thread while you were sleeping & forgot to wake up?

Ron you are missing alot of cost in your figures. No you don't need a brand new 9650 but the old one will need to be replaced someday.

Ron you still have to figure a cost of living on an extra 1/4. If you your cost was $10/acre living on 1 quarter than with 2 it would be $5/acre still a cost.

40(easy average like you said) what do you do like last year with frost 20bu/ac*$4.50/bus =$90/acre. 215-90=125 loss. But I guess you guys don't have frost.