Wilie: The boys are late thirties and early forties in age. They are good farmers. I mean that they do a good job with the crops and all. Their places look well kept and all.
The concern is that my friend started these boys way up the ladder. He was tight and worked like a slave an built a fine operation.
His biggest worry is that inflation has eroded his equity compared to the gross.
Example:
Just five years ago 3000 acres would have a gross of maybe $1 million. So if he owned assets worth that million he was golden.
Now the 3000 acres could gross $3 million and his assets are only $2 million. Now there could be a million short fall.
I know this is a very simplistic example but it is the heart of the matter. The equity you have could vanish very fast with todays prices. One bad crop could do it even with insurance. The margins this year are razor thin on most of the rented ground.
Lets say you lose $200 per acre on 3000 acres. That kind of lose would be very easy to do with the total cost per acre being right at $800 to plant an acre of corn with rent included. That is $600,000. That is years worth of profit.
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