Buying ground

[David Ernst]

With farm real estate prices rising and interest rates low, what are people's thoughts on buying ground?  Thoughts for a young farmer?

[Matt Duncan]

I just heard of a track of ground out in lowa with a C.S.R. of 61 that was sold at an aution for $8900 an acre. Good luck Ive found its hard to get the financing to buy ground at an aution because you have no Idea what the buying price will be. It will be easier to do if you can find a track of ground that is listed with an agent and they have a price in mind.

[David Ernst]

The finding a tract from a private person or agent advice was given to me from my financer.  It makes sense.  They can give me an auction finance, but give me a cap.  Prices are really soaring around here with alot of older farmers buying and alot of outside investors wanting farmland.

[Brad Boustead]

David,

Considering fixed and variable costs of farming, we generally promote that is is easier to make more money by producing more on the ground you have than buy more ground.  That being said, it takes ground to farm.  Is there a way that you can rent, sell your labor, do contract planting/harvesting etc save up your profits and be ready with some cash when the opportunity arises? Another possibility may be to buy some ground of lower quality (cheaper) and implement our soil conditioning and micronutrient programs to get better than average production numbers then buy some of the big money ground in the future.

Best regards,

Brad

[Adam L. Casner]

David,
I imagine we are probably in a similar situation. I’m graduating college in May and headed back to the family farm. I have been eager to buy/rent ground in the area but with cash rent averaging $250/acre and selling for anywhere between $5-8,000, I have decided to just stick with the ground I already have and make improvements on it. The way I see it and as history tells us, this economy is going to have a major "correction" if you will (1980's). $13 beans and $7 corn is great but it just doesn't work. Sooner or later commodity prices will fall back and the input costs will stay the same as they were with the high prices. I know a lot of farmers that have made big land purchases based off these high commodity prices and I would venture to guess that when these prices fall they will be crying the blues. I for one don’t want to start my full-time farming career on a bad note.

[dale a. Brandt]

Adam,

 

i think you have a great idea about taking care of what you have before trying to get more. however,  $250 an acre rent is a bargain even when corn was 4-5$ a bushel.

 

and your statement about the 80's is great... however the current financial status of almost every farmer is nearly bulletproof!  farmers have money. a friend of mine a large commercial lender...is only giving out new loans to farmers.

 

I just bought a farm myself.. i was flush with cash and when the opportunity presented itself to buy a farm i grabbed it... i had been saving up for some equipment .. but the fact of the matter is that can wait.

 

Anyway, good luck

 

Dale

[pooboynotiller]

Dale, I don't mean any disrespect at all.  I think you have great ideas and are very insightful.  But to say that all farmers have money??????  I realize I live and farm in oklahoma that should have been left a prairie, but here where we can't raise the "BIG" crops.  I think this market is setting up some really succeptible people.  People that have been farming for many years,  I REALLY hope I am wrong, but with the prices of land, and inputs.  IF the markets change there's gonna be a whirlwind of bankrupt people.  Some from the cattle market, some from the grain side.  I sold calves for more than I ever have in my life.  600# steer $1.75 last week.  The problem in this is it felt AWSOME to sell them, but the smaller one's are so high I can't buy them back and feel comfortable about the risk.  The market has to correct its self sooner or later.  Around here if you have money it DID NOT come from farming.  Either you inherited it, or they are pumping it out of the ground in oil and gas.  Only problem in that being in the last 30 years there hasn't been much of a mineral trail to pursue.  The big oil companies jump on them if there's anything at all under there.  Leaving the young farmer left hi and dry.  Again I would caution on banking on these markets to stay this way.  I HOPE I AM WRONG!!!!!! lol

[James Kelly]

Well, as a young farmer myself, I think the best investement right now is buying land, certainly not to much to get yourself buried in debt, but I think that the younger the farmer the more sense it makes to start investing in high quailty crop land.  Why?  Just think what commodity prices are going to be in 30 year, if prices are significantly higher so will the the cash rent prices. Yeah I am not argueing that another 80's credit crisis might happen again, but in the long run farm land value will steadly increase as less farmland is taken out of production and the world population increases. For you guys out in the mid west with high productive soils paying 250 cash rent, If I was in your situation I would be defentily be trying to acquire more land at values of 5000 dollars an acre.  Where I farm we have sandy loam soils with limited production capcity averaging 60-70 cash rent, and farm land has been trying to sell from 5000-10000 an acre here for years, 9 times out of 10 its not farmers buying land anymore but realestate companies, investors, subdividers, buying for long term investments.   How am I suppose to justify 5000 an acre on land that I pay 60 when I average 35 bushel soybean on a given year at best?  Whats going to end up happing in the future is that the number of farms on the east coast, and far west are going to SIGNIFCANTLY decline. Ya'll in the mid-west will have the responsiblity of the countries/worlds production of food.  SO if I were you I would invest in land if you are a young farmer, older farmers might not see returns of the investment depending on your age.

[Jonathan Stech]

I am in the same boat I graduated college last may and I would like to get started and I have tried to rent some ground but lost out to the big guys.  The real estate prices here where I am I can't even compete cause it would be just way to much.  So I currently work for a pioneer dealer to get some money under my feet and may pay off college loans.  Currently I have wrote letters to perspective landowners to rent their ground and hopefully I can get my start there.

[Ben Pearson]

David,

Much like several people and maybe yourself, I just graduated college in December from K-State.  I have been wanting to farm for my entire life.  My family farms in an area where much like some, the ground should have stayed in prairie.  The only thing we have going for us is that we can get water pumped out of the ground easily.  Dryland ground a mile from me sold for $1200/ac, unfortunately the ground much like all of my family's floods from a creek and isn't great soil.  I have been bidding against larger already established farmers for renting rights and can't even come close to their bids.  Thus it has been forcing me to consider beating them by buying the stuff away from them.  I can't do this though because college has drained me and I don't have enough money to make the down payments needed to buy the ground outright.  Buying ground is great, God isn't making anymore of it so it will always be worth something.  

But I have been fearing the correction coming soon and I don't want to stick my neck out to soon and never be able to farm.  One thing to consider is that if you can pencil it out and stick to a plan you will do great.  However, with our country so broke and politicans wanting to cut so many programs out of the budget the correction could be coming soon.  I could be wrong and anyone can correct me, but the other day they were talking about cutting out farm subsidies and many farm programs.  

[Morgan McNeal]

I wouldn't be to concerned about the farm subsidies.

Here are the two situations i see. 

One: They dont cut farm subsidies because the government would be loseing control of farmers. and we all know that is the last thing they want.

Two: I feel losing farm subsidies isn't going to hurt the little guys. If you are relying on the farm subsidies to farm, your not very good job of farming and managing money. I farmed around 140 acres last year and i got 900 dollars, whipty do. If anything it will help us younger farmers, by cutting farm subsidies maybe some of these bigger farmers who farm the farm program will realize that its hard to make money doing a lack luster job of farming with no government help. It might be possible that we see a drop in rental rates, perhaps even land values though not as much.

[David Ernst]

I agree.  Although I was not farming on my own in the really low grain price era,  it seemed the LDP programs did more.  At this point in time the subsidies aren't doing a whole lot for me.  The extra money is nice,  but not necasarry.  More money is burnt up in the paper work and proceessing in the agencies than to the farmers.  I also know many of the bigger farmers in my area find the loop holes to get subsidies on every acre even after they have hit their cap.  They are the true beneficiaries to the program.  In my area after talking to several "little family farmers" that supposedly get the true benefits feel the same way I do. 

[Ben Pearson]

Very good point.  I never thought about how the bigger farmers could be hurt by the lack of subsidies, which could help out us smaller producers.  My thoughts were that if the politicians do away with the subsidies the price control of our products that has been around since the 70's would be gone , and prices could go up significantly.  Then people will bicker about farmers ripping them off along side the oil companies.  Lets face it Americans are really spoiled when it comes to cheap food.  Thats kind of how I saw things playing out and causing a correction to come soon.