Posted by JD Seller on January 05, 2013 at 15:44:02 from (208.126.196.144):
In Reply to: Re: Farmland prices posted by oldtanker on January 05, 2013 at 10:31:31:
Old tanker your input costs are about a $100 per acre short. Also you are not counting the land cost. Even if you own the 500 acres of ground you are talking about there is a cost to owning it. Real estate taxes on 500 acres around here would be in the $35000-60,000 range.
Also if the ground is worth $12,000 per acre then the total valve would be $6,000,000.
So if he is clearing $400,000 then he is only getting a 6.6% return on the capitol investment.
I also raise corn and the numbers you are throwing around are off toward being lower in cost and higher in gross income.
The long term average for farm land return is in the 4-5% range. That is still better than what CD are doing so that is where part of the money is coming from.
We also have a loose credit market right now. It is easy to show a cash flow that works with $6-7 corn but put in $3-4 dollar corn and see how it falls apart real quick.
We are one good crop away from low prices again. The high current prices are causing corn to be grow in more places world wide. I just read where South Africa is now exporting corn. So when we all have a good crop bushels wise it is going to be bloody in price.
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