SquirrelBoy
New Member
$10,000 an acre around here too, and by getting land that zoned Agricultural you save bookoo bucks on taxes versus it being zoned Residential.
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Buck Junkie
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It will end when operating margins revert back to historic norms. There is an old adage in the commodity business “ the higher the highs the lower the lows”. Ethanol will consume nearly 40% of the 12 to 13 billion bushel domestic corn crop; the remaining will be used for domestic consumption and exports. Domestic consumption is mainly comprised of feed for hogs, cattle, & poultry. I believe we export somewhere near 20% of our crop. On the ethanol issue it is not often you get a government subsidy and then a mandate of usage. There is one thing about relying on government policy; it changes.
Cost of inputs is near $550 per acre excluding land cost. Add in land cost of $250 to $350 and you arrive at $800 to $900 per acre. Divided that by the Dec 2012 cash price of $5.10 and they have a breakeven cost of 156 bu to 176 bu an acre. Most operators should have a 175 to 180 bu proven yield over the last ten years. Assuming they can protect up to 85% of that via crop insurance they can potential protect 153 bu. Two things the farmers are betting on; higher yields and higher prices.
Suppose you finance $4000 an acre on a purchase of $12,000. Sounds like a great deal low LTV with nearly 66% equity. Payments will be $321/acre based on 5% interest and 20 year amortization. Add in tax of $15 to $20 and your approaching $350 per acre for the next 20 years! These operators are layering in higher legacy cost at ultra low rates. Time will tell when the land bubble pops, I believe we have several more years. When it does happen they will be back peddling and you will see them running for more government programs to help them
Cost of inputs is near $550 per acre excluding land cost. Add in land cost of $250 to $350 and you arrive at $800 to $900 per acre. Divided that by the Dec 2012 cash price of $5.10 and they have a breakeven cost of 156 bu to 176 bu an acre. Most operators should have a 175 to 180 bu proven yield over the last ten years. Assuming they can protect up to 85% of that via crop insurance they can potential protect 153 bu. Two things the farmers are betting on; higher yields and higher prices.
Suppose you finance $4000 an acre on a purchase of $12,000. Sounds like a great deal low LTV with nearly 66% equity. Payments will be $321/acre based on 5% interest and 20 year amortization. Add in tax of $15 to $20 and your approaching $350 per acre for the next 20 years! These operators are layering in higher legacy cost at ultra low rates. Time will tell when the land bubble pops, I believe we have several more years. When it does happen they will be back peddling and you will see them running for more government programs to help them