Posted by paul on January 06, 2008 at 19:39:52 from (66.44.132.218):
In Reply to: farm land price posted by macco on January 06, 2008 at 16:30:51:
Kinda takes 20-30 years to 'pay off' land, if not longer. So..... What are you asking?
Today land prices are at record highs, corn & bean prices are near record highs.
Buy land now, will corn & bean prices remain this high for the next 20 years?
Seems unlikely.
You can make your plan work for one year in 2008.
What happens when crop prices return to $2.50 corn, $6 beans? And seed, fert, fuel, & chemical prices are also at record highs - will they remain there or lower?
You can make your plan work on paper for a year or 2, but the future does not look to good for it.
Of course, how long will you hold the land, and where do you think land prices will go? Land is an investment, making money from production might not be needed, if you can buy it low & sell it for high. However, you are buying at a known peak of land value - it may continue going up, but you are not at a smart position for that.....
Lot of folks are getting greed in their eyes when they see these crop prices Some feel they will go up a few buck higher. I think if that happens, in an election year, the crys from the masses on food prices will cause the politickers to do something - embargo, release all CRP land, etc. - to drop crop prices quickly to a cheap food policy.
We are on thin ground, as farmers, as folks will always complain about high food costs, and when the govt 'fixes' that then those same folks will complain about govt subsidies to farming. No-win.
If you have $2 million sitting around with no place to invest, it's hard to know where to go with it I'm sure. Stocks, bonds, etc. are going to heck, cheap dollar is hurting most investments.
Long-term, I think you would lose money with your plan if you pay average price for average land today. might look smart for 2-3 years, but I think the odds are costs will remain higher as crop prices fall back, and you will not make the payments. Anything can happen tho.
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