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Current state of farming/ag

I’ll keep this generic…. Farming, to SOME extent - is a good illustration of HUMAN NATURE & preparing for what might come ahead. Some do, some don’t.

It has these boom & bust cycles that have always existed in some form. It could be related to weather or it could be commodity prices & inputs.
Many farmers will say “the MAN will only let us farmers make $ for 2-3 years before they need to suck it all in”. Prices go up- the fertilizer companies, equipment manufacturers, farm rent prices- UP!

Who is hit the hardest where it truly sucks?!?!…. The younger farmer who is scrapping to get going. Has to borrow $. Pays cash rent. Has to finance xyz. There’s almost no way around it- if you’re newer & prices crash or inputs & interest are high- ouch. Get bad yields on top of that - compounds. If u r lucky enough to inherit a farm & equipment- clearly very different.

This is the “human nature group”…. “I killed it for 3 years during Covid!!!! Huge profits!!! Plus Gov $. Grain at record prices”. A big variety of what SOME might do…. Go sign up top of market rental rates. Go buy new trucks, combines, etc. Spend spend spend. When many SHOULD have said SAVE!!!!!! We all know troubling times come- ALWAYS. Back to the Bible with years of feast to famine. Always been that way. Think of anyone u know in any walk of life… they get a chunk of $…. Some will blow it - some will be extremely wise with it. That’s just human nature. Farmers aren’t that different.

“So why does ground keep going up?!? Especially when things are rough”. In the regions with very established families with high productivity - ground they bought in say, the 1980’s & 90’s for say “$2k an acre” has LONG been paid off. Sometimes for decades now. That’s zero cash rent vs the new guy that is paying $250-400 & all the other debt. Some of these areas have overloads of “free fertilizer” or kinda free. Manure they need places to go with it. That’s huge increases in yields- HUGE - VS the places where dudes are paying the coop “$200 an acre” for that same fertility that isn’t as good. Those are HUGE margin changers. So- when your ground is paid off & been that way for a long time & u didn’t have all these expenses - if u saved…. Say u have $1-10m in the bank (or just have 0 to little debt)… the 160 comes for sale next to you…. It sells for $3m ….. u write check or u borrow the $. “Hey, i got $3m in debt on $30m in assets”. Not a big deal. People will bid it up in those regions. I don’t blame them & clearly that’s an amazing spot they are in- which probably took 20-50 years to get there.

Where do prices go down???? Regions without that generational wealth. Areas that are usually less productive. Think of N iowa vs S iowa. S iowa is far more suppressed economically & the fertility is less, yields less, wealth is less. Those guys have more debt & when times get tough- they hurt the worst. N Iowa vs S lowa is a very different dynamic. In times like this, N iowa prices will soften a touch. Prices in S iowa will soften far more. IMO- way better value buying dirt in S iowa. I could make the case for both but I’d rather do s iowa as an investor or maybe even a new farmer.

These cycles will never end. Human nature will always react with a mix bag of how guys handle boom & bust times. During the bust times- it’s the best opportunity for guys who want to get into the land market.
 
Windlooker said:
Sounds like a journey of life lesson regardless of chosen profession. Can’t start at the top at 23 years old unless it’s handed to you. Put your time in and navigate the peaks and valleys. You win some and lose some. Life 101.
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Yep! Even tho the current farm economy isn’t great for newer/smaller farmers the situation isn’t unique to agriculture! Pretty much every business gets easier to run and more profitable after you start building some equity!
 
In Kansas and no I haven't seen any cotton ground irrigated.Most of Kansas you can't get permits to irrigate.Problem is the guys will suck out of river systems underground and over use but just pay the small fines. Another saying How to make a farmer a millionaire?, Start him off as a Billionaire. I think alot of the reason that land prices still go up is from investors buying the land looking for the 7% average yearly increase.Here not alot of farmers do cash rent, mostly 2/3-1/3 shares. There are a couple that started paying high rent and trying to put in pivots but usually only last a couple years doing that.
 
sep0667 said:
Ive never understood it. Some farmers run old equipment, vehicles, have old houses in bad shape etc. They seem broke. Then others are constantly driving the newest equipment, getting a new pickup every couple of years, nice houses, sxs's, going on vacations etc.
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My father in law farms a couple thousand acres. Closer to 1500 now as he lost some rented ground. Also worked full time until retiring a couple years ago. Still has older equipment and an old pick up truck. Used his vacation time to plant and harvest.

His wife also worked making a good salary teaching full time until recently retiring. She makes more with her ipers and ss than while working. She Still works part-time.

He did finally build a modest shop a few years ago, but otherwise they don't travel or spend any money. They are debt-free and I'm guessing have a nice nest egg.
My daughter's father-in-law farms a couple thousand acres. Has old buildings but lots of equipment and just built a million plus dollar house. Drives a nice truck but doesn't get a new one each year. Also owns a vacation home down south.
I am guessing he is in debt quite a bit, but I'm not sure how much of the land he inherited.

I don't even know what my point is just that the two situations are similar to described above. Totally opposite lifestyles with only one being a surefire bet to success.
 
I know times are sure different,My SIL farms several thousand acres and has cattle.has alot of equipment and uses 45 ft headers now.We were talking about his grandfather used like an 8 ft header and farmed a few hundred and it took longer than now days.But it's full time now and he spends alot of time fixing fields that need limed or hedge rows cut back,terraces fixed,calve and work cattle etc.
 
habitat said:
In Kansas and no I haven't seen any cotton ground irrigated.Most of Kansas you can't get permits to irrigate.Problem is the guys will suck out of river systems underground and over use but just pay the small fines. Another saying How to make a farmer a millionaire?, Start him off as a Billionaire. I think alot of the reason that land prices still go up is from investors buying the land looking for the 7% average yearly increase.Here not alot of farmers do cash rent, mostly 2/3-1/3 shares. There are a couple that started paying high rent and trying to put in pivots but usually only last a couple years doing that.
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FWIW, the part that I bolded above is EXACTLY what is behind multiple recent land transactions here in SE Iowa that I am aware of. To be perfectly honest...I too am a participant, and also a likely future participant, in the same game. ie. investor, also a hunter, that is looking for a reasonably good investment/combo rec and ag farm.

At least right around my area, it is not the average farmer buying up these types of farms at this time. The per acre prices are too high to make it "pencil out" to make sense if you are trying cash flow it via farming.
 
Getting your hands on more ground to farm is never easy. Some guys just need more ground for things like manure management and other stuff too. Never bad having more. It doesn’t really have to pencil out on a per farm basis for some to justify buying it. If the majority of your ground is paid off it’s ok if an individual farm doesn’t exactly pencil out. Long term it will. There really is just a lot of ground that is bought and paid for in Iowa where there will be always be somebody close by that can pay for it even if it doesn’t seem to make sense. This is kinda like what I like to call “New Gun Math”. It doesn’t have to pencil out. If I want it, I’ll find a way to justify it!
 
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Daver said:
FWIW, the part that I bolded above is EXACTLY what is behind multiple recent land transactions here in SE Iowa that I am aware of. To be perfectly honest...I too am a participant, and also a likely future participant, in the same game. ie. investor, also a hunter, that is looking for a reasonably good investment/combo rec and ag farm.

At least right around my area, it is not the average farmer buying up these types of farms at this time. The per acre prices are too high to make it "pencil out" to make sense if you are trying cash flow it via farming.
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This is an interesting conversation. Is "investor" turning into a bad word? What defines "investor"? Seems a lot of us fall into that category. I think there's a clear distinction from investment capitol groups buying up land (and single family home, for that matter) and someone using land as an investment. How does that compare with an individual or small group using land as an investment, while improving the land, bringing kids and grandkids, family and friends, while also having a stable investment. Where is that line? I'm currently reading "The Land Trap" and its a pretty interesting read on using land as an asset, investment and borrowing tool and how that has been a double edged sword globally over the last 200 years or so.
 
CottonwoodCanyon said:
This is an interesting conversation. Is "investor" turning into a bad word? What defines "investor"? Seems a lot of us fall into that category. I think there's a clear distinction from investment capitol groups buying up land (and single family home, for that matter) and someone using land as an investment. How does that compare with an individual or small group using land as an investment, while improving the land, bringing kids and grandkids, family and friends, while also having a stable investment. Where is that line? I'm currently reading "The Land Trap" and its a pretty interesting read on using land as an asset, investment and borrowing tool and how that has been a double edged sword globally over the last 200 years or so.
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In high school I helped a farmer and all of the land they leased was owners from Chicago- they buy a lot of ground in my area currently at very high prices where none of us younger guys can stand a chance unless we can catch the people right before it hits a market. But the flip side- these same guys are looking FOR their investors so it’s harder and harder every day in this area.
 
As one neighbor puts it once you own the first 1000 acres the rest is easy.

Everything that sells locally the last few years has been bought by local farmers. That may change as there are several large farms that will be on the market in the next 5 years due to heirs selling when the parents are gone.


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CottonwoodCanyon said:
This is an interesting conversation. Is "investor" turning into a bad word? What defines "investor"? Seems a lot of us fall into that category. I think there's a clear distinction from investment capitol groups buying up land (and single family home, for that matter) and someone using land as an investment. How does that compare with an individual or small group using land as an investment, while improving the land, bringing kids and grandkids, family and friends, while also having a stable investment. Where is that line? I'm currently reading "The Land Trap" and its a pretty interesting read on using land as an asset, investment and borrowing tool and how that has been a double edged sword globally over the last 200 years or so.
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I do not consider the word "investor" as a bad word, FWIW. I was just trying to articulate a profile of some land buyers...good or bad, it is not actual farmers though that are purchasing the land in all cases. In fact, one of my actual farmer friends recently floated the idea to me about me buying up some his land. He gets cash, he would still be farming the same ground, I get the land, some investment returns (modest) now via land rent, etc, but also longer term investment gains as the land value climbs over time, hopefully, and the "say so" in a neighborhood that I would prefer to be in. Win, win.

I suspect that there are different dynamics at play with land that is all, or nearly all, tillable. Us goofy deer hunters don't want 80 acres of bare ground normally. But the "mix" or "combo" farms are being bought by non-farmers A LOT.
 
Daver said:
. In fact, one of my actual farmer friends recently floated the idea to me about me buying up some his land. He gets cash, he would still be farming the same ground, I get the land, some investment returns (modest) now via land rent, etc, but also longer term investment gains as the land value climbs over time,
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This scenario seems to be getting more common. I know a few guys that were debating giving up some of their rented land vs. selling some of their owned land and locking it into a somewhat long term renegotiable lease with the new owner. I didn’t understand why it made sense to sell at first. It kind of did tho. Giving up rented land did nothing to improve their cash situation and made their input costs rise on a per acre basis. It’s not a bad step towards retirement if you never planned on passing all of your ground on to someone else anyway.
 
booneriverbucks said:
This scenario seems to be getting more common. I know a few guys that were debating giving up some of their rented land vs. selling some of their owned land and locking it into a somewhat long term renegotiable lease with the new owner. I didn’t understand why it made sense to sell at first. It kind of did tho. Giving up rented land did nothing to improve their cash situation and made their input costs rise on a per acre basis. It’s not a bad step towards retirement if you never planned on passing all of your ground on to someone else anyway.
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Bingo. ^^ In a nutshell, he is prioritizing money in his pocket now v. later...where later could include after his passing. Some guys are cash poor and land rich.
 
Corn & soybeans are quietly up 10-12% in past 6 months. Fertilizer issues could rear its ugly head. I own a fertilizer stock & get daily updates… the stock has went bananas to the upside! Watch the market …
 
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Hardwood11 said:
Corn & soybeans are quietly up 10-12% in psst 6 months. Fertilizer issues could rear its ugly head. I own a fertilizer stock & get daily updates… the stock has went bananas to the upside! Watch the market …
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Feeling pretty good about having all inputs including fertilizer bought for this year. Selling old crop and new crop at profitable levels. The rally may only last as long as the Iran conflict so its anybody's guess how long it will stay here.
 
It’s a crazy balance between fuel/corn prices. Definitely a correlation. Not necessarily a consistent correlation dollar for dollar but it does exist. I deal with it all the time. Like to think I plan it all right and win every now and then but who knows :)
 
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