Well-managed beginning farms can thrive in uncertain times

[John Walter]

I just posted a story on Agriculture Online, Well-managed beginning farms can thrive in uncertain times, by Dan Looker, who attended a conference for young and beginning farmers in Omaha this week.

The piece covers a presentation by Dave Kohl, an ag finance expert who's also had lots of practical experience, including a deal in which he invested in and helped turn around a now profitable dairy farm that sells bottled milk and ice cream directly to consumers.

Kohl believes that despite the volatile economy there are going to be some good opportunities ahead for young and beginning farmers, particularly those who have some cash on hand. (Yeah, I know, who has too much of that?)

"He advised a three-pronged strategy to protect against risk--protecting revenue with crop insurance and hedging, working to keep cost inputs as low as possible, and managing interest rates," Looker wrote.

Perhaps most interestingly, Kohl told the group that he believes that some beginning farmers will have more opportunities to buy or rent farmland as some recently purchased land comes back on the market. "They're going to be lots of opportunities over the next 24 months," he said. "You're going to have to be real careful that you don't overpay."

Anybody else optimistic that there may be some good opportunities in the near future to expand your farm business?

[Adam]

Yea, sounds cheap don't it? Our Avg. precip is 16" pretty much a desert out here most years. This year's been good so far with moisture, but way too many hail events. I've heard what some people are willing to pay for that Iowa potting soil, I couldn't even imagine that. Have family up there and get to see some outstanding crops. I just wouldn't know what to do if I didn't have to irrigate my corn crop.

[Nick]

Yes Kevin, similar South of Adam where we are. Take note though, this is not an easy area and dry land is not to be compared to the northern states. Little bit West of us One good Wheat year out of 5 is considered the norm.... :)

[Clayton Mitchell]

I can't recall what the market analyst said for precise FROST DATE but here's the link to the market report. I would like to lock some $15 beans for 2010 but then that would cause some producers to lose money this year. She seemed to indicate if we lost 5 Bushels off of beans this year it would give us $20/soybeans..

http://www.iptv.org/video/detail.cfm/4855/mtom_20090821_3451

[Nick]

Well, although I would not mind the higher prices, we did replant almost a whole week's worth of corn that got hailed out, so we are at tassel now, which will most definitely freeze out if it comes that early....I listened to the weather guy earlier in the week and he did not see anything yet....so I guess we'll wait and see....

[Clayton Mitchell]

I just heard one of our Friday Market Analysts on Market to Market, Sue Martin, predict that if there is an early frost, something like before labor day, she would anticipate the market would probably give us $20/soybeans.

That would be nice if Fall 2010 Soybeans we could contract them at least $15/bushel plus.... That might help some young producers buy some new green paint or land.

Anyone else here talk of early frost predictions?

[Adam]

Land prices in my area have been $600-800/acre dryland, and have seen $2500/acre for irrigated ground.

[Adam Gaska]

You don't need luck, you need lots of money to buy farm land where I live. Anything near flat goes for $30-40,000 an acre and that's without a pond or well.

[Clayton Mitchell]

From 1994 on I purchased quite a bit of land at what are perceived now as low prices with 100% financing (no money required cause banker liked the deal) or equity from other land. That debt today now paid off looked worrisome at the time. I have sometimes used that equity to buy another farm which those have paid down now. I have never bought a farm where I haven't worried did I pay too much. I have always looked back and said, wow, if I didn't buy that it would have been worse because it is perceived not affordable.

It's not going to get any cheaper anytime soon. Too much land in Iowa is owned debt free with little incentive for landowners to sell and move capital to other alternative investments. Land is the safest and most alternative investments are very risky (Buffett says cash is a risky investment cause it's going down in value as you hold it).

There have been auctions in NW Iowa this summer for $8,000/A+, Hertz had one 10 miles North of Ankeny that brought $6,450/acre today, and another in Madison County 3 weeks ago sold for $6,000/acre. I am seeing land in central Iowa already up to prices it was last summer when we had $7.50 corn..

If Oil goes to $100/barrel by December like some suggest, dollar falls, inflation happens like Buffett predicts then I say land and commodities have great upside from today. Feel like adding some risk to your operation? If you don't buy it someone will, rest assured...

Good luck to all!

[Andrew Wagner]

The key to this whole situation is if you have money on hand (or can access it with credit). You make more money in a trying time by making smart purchases and managing your input costs. If you can make purchases of land and equipment at a lower price, then you can make a larger profit off of these investments when the commodity markets and land prices make a turn upward.

[Messerli Ruedi]

I think that too, if I wasn't optimistic I don't plan to become a farm manager on a row crop farm or buy into a row crop farm. It is important to keep the costs as low as possible. Specifically with the farm equipment young farmers (olders too!) can save a lot of input costs. In many cases the job can be done also with smaller equipment or older. It always a balance between the equipment costs and weather or downtime risks. So that's an important point for me.