Predictions and Observations

[AlbertaFarmer5]

Remember R Calf?

All too well. What is the connection?

[blackpowder]

One group, one state, became federal policy. Would that happen here if not from Quebec?
ND senators fought CWB.

[sumdumguy]

Canada, a confederation destroyed by special interests and a despotic powerhouse. Quebec made special pulls the strings, Maritimes heavily laden with senators, Eastern Laurentian elites crushing the West, no democracy where coalition rules not votes for and against, the constitution means nothing. In Canada we need equal representation but how can we get there?

[Crestliner]

Watching events unfold at the end of 2023 into 2024 some observations in my opinion.

1. The really smart guys are sold out of wheat weeks ago at $9 plus and $16-17 canola. The next smartest guys are selling and hauling wheat now at $8.50-9.00 and Canola for $14-14.50 now. No snow to push, no heated grain, bills will be paid and money in the Bank when 4 feet of snow and -40 below hits in Jan/Feb/Mar....The ones doing nothing today will hate their life in -40 February when the sell for less. The only hope for canola will be the crushers, export market is done and will be cheap buyers, and the crushers can't buy it all. We need more crushers.

2. Grain price "pop up" experience of 2021/22 and part of 2023 are done. We are going back to pre-Covid numbers. Users are going back to hand to mouth, freight is moving normally, very little risk to upward price movement, buyers will wait till they have to buy and will bid low. The shorts are in control.

3. Land rents and land prices have topped out. People who locked in at high priced rent will hate their life in the next few years. People who broke records and paid insane land prices will make zero money for years to come on their prized investment, or lose it. That money invested in the local credit union will have been a better return. But as they say "greed can be a bitch".

4. Equipment prices have peaked. Free Cashflow on farms will not support current prices. Dealers and manufactures will reluctantly lower prices. Nobody cares how much their labor costs and steel have gone up...farmers will have no money to support the prices that have been paid. I wouldn't want to be a Seedhawk or Bourgaut manufacture....I mean paying $1million for one drill to plant a crop. We will look back and go wow. What were we smoking?

5. Interest rates will stay high for years to come 8-10%. On $5000 land that $400-500 per acre...farms will fail. Fixed costs are astronomical on many farms...variable costs will come down and have come down but won't make up for the high fixed costs farmers have got themselves into. Input companies will move quickly to sell farmers land to recover inputs not paid for. Land is so high and greed is off the charts so it will work for awhile till all the money runs out. Even the BTO's with daddy's 50 years of equity will be getting low. FCC employees will hate their life as the panic sets in. They helped create the mess. They have a history 40 years ago doing the same thing.

6. Crop insurance numbers will be down 25-30% lower coverage in March. Huge hit in coverage, just a reflection of grain prices.

7. Ukraine war is stalled and virtually wrapped up. Russia is the victor and grain will flow at full speed again. It's amazing the grain moved like it did. This will have a further negative impact on grain prices.

8. Huge turnover in farms coming. 40% of farmers plan to exit the business in the next 10 years. That will accelerate when the cash flow stops or is negative.

9. Federal Government hates farmers...can't even throw a bone on carbon tax relief. Western Canada should exit Confederation. There is no economic reason to stay.

Sorry to be so negative. It's just the way things are lining up. Greed has been fuelling the run up in a lot of areas agriculture, farmers, bankers, suppliers, manufactures and it's all coming to an end. Buffets said to be fearful when people are greedy and there has been lots of that.

The farmers who have done nothing but build up cash, pay debt down, and made
prudent purchases to add to their farms will have a chance to benefit from the reset that is coming. Low cost production operators will thrive and continue to grow.

Thoughts?

What are people's thoughts now January 4,2025?

[blackpowder]

Land sales here went up again this year. $1.2M/quarter regardless of sloughs. BUT. The % x fmv equation for rent no longer works. Finally.
Landlords will have to blink eventually.

[ajl]

Just read through the predictions and looks like the only one that came true was the one about grain prices this past year. (and the one about government hating western farmers but that has always been the case) The bank of canuckistan is very involved in propping up the failing regime so interest rates went down fast and so did the loon which is helping the land market stay supported for the time being. Cattle prices held and I think cattle will continue to do well, mainly due to feed prices coming down as I think cattle prices have topped, as long as the industry can derail Bovaer. (cattle anti fart potion) A neighbor to one of my rental parcels actually seeded >100 acres of new alfalfa this past year getting ahead of that curve as grain prices will remain in a slump. Will be interesting how long the younger farmers will continue in the face of no income this time around. Still some equity to burn. Fake it till you make it. Most people, myself included, would rather do time than serve a sentence in the canuckistanian job market.

[LEP]

Many, many moons ago I did my thesis in University on the relationship between land prices to grain prices.

80 years of data, I believe.

There was a 2 year lag in land prices from grain prices. That lag may stretch alittle longer because of the recent good years that strengthened balance sheets.

[blackpowder]

Curious if done today would the ratios be the same?
Assume inflation counted.
1971 $100. 1981 $1000. 1991 $500
2002 $1000. 2017 $4500. 2024 $7500. Our numbers here.
Rent another thing altogether.

71 1/3 gross. 81- 1/3 net or $35
2001 (1/3 fert chem only, out) or $50/acre
2017 1/4 gross or $75-90/ (one actually double the $ rent over the other)
2024 2.?% x fmv. $115-$160 cash.
(Ranges shown not related to each other for any given year. As if pulled from the air)
Last years %xfmv equation will definitely not be repeated for any new contracts in this area.
Guessing.....$160/ the new peak. Here.
How many years will the record hold?

[blackpowder]

So if the 50 yr rule applies.
$4000/ac by 2030-40

[farmaholic]

I've been wrong-wrong-wrong on the price level Sask farmland rose to, I don't think I'm going to try and guess when or how far it might fall.

Landholder's age and whether or not there are any farming children or non-farming "estate beneficiaries", all determine whether to cash out or hold it. If you don't want to pay capital gains taxes.... just bequeath/defer that burden to the next generation...lol.

Tax laws are tricky when the direct lineage back to the farming family get broken! DOYDD!