land prices going up?

[cowman]

The neighbor sold this really hilly old quarter this spring for $497,000! That works out to $3106/acre! No buildings, one gas well on it!
I was surprized because another quarter just down the road was listed for $380,000 and it was good flat land, all broke and producing a good crop. Now I know which one I would have bought?
Anyway the new owner is busy building a mansion and I happened to stop in one day when he was there.
He said he wanted a mountain view and a place to have a few horses. He was an instrumentation supervisor at the big petro-chemical plant at Joffre, so I assume he could afford it!
It seems more and more land is being bought up here by the suburbanite for a rural playground? I have no idea where the limit is on these land prices? I do know you sure as hell can't afford to run cows on land that is worth $3100/acre?
Also last week I was talking to a tool push who sold his house at Sylvan Lake(quite close to the beach). He paid $234,000 for it six years ago and sold it for $478,000! Now that was a good rate of return in my estimation!

[nicolaas]

Its happening all over cowman. A 150 acre property half mile from my place sold this past spring for a lot more than it was worth, and now the big mansion us under construction. Some fellow that works in the oil industry and wants to have a place for his horses ! Rumor has it that he wants to create a country residential subdivision within a few years, but thankfully he is half a mile from one feedlot and a mile from another so it may be tough to get approval from the county.
Another property adjacent to me sold this spring, 25 acres with an old mobile home and a couple of sheds on it, the folks were from around Sylvan Lake. I wondered when the horses would show up and sure enough drove by yesterday and there were a couple of horses in the field !

Next thing will be the dog that won't stay home !!! ( I am actually a fairly good neighbour but have had some interesting experiences with stray dogs and horses wandering into my yard over the past few years !).

[farmers_son]

The fellow earned a 12.64% return on his Sylvan Lake property before taxes and costs. If you think that is good Tyson shares earned better than 17% return over a 42 year period.

[farmers_son]

farmers_son, I am curious as to how Cargill's earnings relate to an increase in land values in Alberta ?

[cowman]

I wonder if Tysons pays a good dividend and if that was included in your 17% or that was just the appeciation of the stock?
I wonder what in the hell we are doing raising cows and barley if we could get a return like that? Maybe it is time we all considered the old adage "If you can't beat them, join Them!"
Obviously Tyson must be one hell of a well managed company to be earning that rate of return?

[farmers_son]

Emarld1: I was trying to put it in perspective. A 17% IRR over a 42 year period is a very good return. Would it be sacrilege to suggest that producers might want to consider other investments besides land? Our preoccupation with the oil industry tends to lead us to overlook opportunities right in our own agri-food sector.

Cowman: In recent years Tyson paid quarterly a 4 cents per share dividend and it was included in the calculation of the annual return. The dividend increased over time. Most of the increase in share value came from splits. I did not save my spreadsheet but I believe that the holder of one original share would now have 664 shares if they never sold any. The per share value only changed from $10.50 in 1963 to something like $18.00 today.

I would not necessarily say that Tysons is a well run company. . If you were to see pirates hauling in their chests of treasure would you think they are a well run company or would you think they were merely robbing and pillaging the weak and less powerful.

We have no idea what kind of return Cargill enjoys at our expense.

Just for fun I have included a paste of information on homesteads that could be had for the price of the application fee of $25.00 per quarter section and available public land in Alberta. This information may be out of date now but it was current as recently as 1970.

http://www.motherearthnews.com/library/1970_September_October/Alberta_s_Homestead_Sales_and_Land_Leases

[grassfarmer]

If you are looking for a quick but potentially higher risk return Cowman buy into the oil boom. Trican Well Services stocks have gained 52.8% in the last 4 months. Now that beats keeping cows... but remember as they say "the value of shares can go down as well as up" - kind of like cattle!

farmers_son, when much of the prairies were settled through programs like the Homestead act how come so few prairie farmers/ ranchers appear to be living on owned land now (versus bank lent money)Too big a turnover of first generation farmers or is it really impossible to make enough money on the prairies to pay for land?

[cowman]

Personally I believe most oil stocks are overvalued? It is a fairly unstable industry at times?
But lets face it, a company that is producing 17% over 42 years sure must be doing something right?
I don't intend to buy Tyson stock but it is an interesting option for someone who might want a long term stable investment.

[grassfarmer]

Cowman the trick with these higher risk investments is to buy, ride them up a bit and sell. Too much of this "mutual fund" thinking leads investors to think that you buy and hold for long term prosperity. The real money is to be made in the buying and selling not the holding - I suppose a lot like fattening cattle.

[farmers_son]

Typically Canadian farmers would own about 70% or more of their total equity, land, machinery, cattle, buildings. Debt contributes to growth of the farm, as long as it can be repaid. The fact that farmers have some debt should not be taken as a sign of unprofitability as in many cases it is a result of maximizing growth opportunities.

As for Tyson shares, there is certainly no guarantee that purchasing the diluted shares at todays values would generate anything near to the past returns. When you say Tyson must have been doing something right, they may simply have been in a profitable industry. We have no information to suggest that Tyson outperformed Cargill or other global competitors whose names would not even be household words in North America. It remains to be seen whether the packers can maintain their past level of profitability given the producers of live cattle in North America are more sophisticated than they were in the 1960s and those producers are at least considering options of how they might increase their competitive position vis a vis selling live cattle to Tyson or Cargill.

The world is full of opportunities for profit. No one can invest in all of them. Most organizations have come to realize that it is more profitable to focus on investing in their core competencies rather than simply aiming for the next biggest winner. Agriculture is no different.

[cowman]

As I stated, I have no intention of buying Tysons stock! I may be "greedy" but I haven't sunk to the level of sleeping with the enemy!
I will agree with farmers son that you should stick to what you know. What the hell do I know about international finance?
Now I will admit,at times I have played a bit. Did fairly well on a few junior oil companies...lost the whole works on some others! Lost my shirt on a "hot Tip"! What can I say? You put down your nickel and you get an education!
I told one ambitious little snakeoil salesman that I had decided to no longer buy stock unless it was on the hoof...then I had to explain it to him!
At times I am tempted, but I no longer play the stock market.