Predicting The Future

[gregb]

How do the subsidy programs play into the price of corn and the valuation of ag land?

https://farm.ewg.org/progdetail.php?fips=00000&progcode=corn

 

[Terrel L. Shields]

Today's covers more than expenses if you want it to buy the coverage and why wouldn't you if you're only paying only 40% of the premium?

You can only buy coverage for the county average yield or have a documented record of higher production. So my renter is covered for 20 bushel per acre, with a couple of farms he's averaging closer to 40. I have no coverage as landlord and cannot get it if I wanted, at least not subsidized. Our green beans were not covered and no one covers it. Not that it matters, Del Monte just shuttered its last plant in the region that once had four five large canners and a frozen veggie market. The buyer provided the seed, that's it. No insurance available for non-grains in our region. Trump has proposed a max payment of $40,000. The average corn belt farm is 1400 acres and inputs about $100 / acre minimum. Wheat prices are so low it makes no sense to even plant in soils that can't produce 80/ bu. Our last wheat was over 50 bu. and sold for less than $3/bu. After expenses, my share was $12/acre. The renters net before wear and tear, depreciation, etc. left him maybe $10/hour for his time.

As for land buyers, insane land buying and high rents is a common mistake. Land is a long- term investment not an expense. Farm magazines were preaching caution but high prices resulted largely due to speculation and hedge fund buyers trying to corner the market. These funds spend other peoples money, just like the early 1980's when the largest farm landowners (forestry owners are larger) in Arkansas was the Hunt Brothers of silver market fame, and Prudential Insurance. (I've taken classes with Prudential farm manager/appraisers)
https://news.ucsc.edu/2017/05/fairbairn-farmland.html

 

[Terrel L. Shields]

How do the subsidy programs play into the price of corn and the valuation of ag land?

Ethanol is big factor for "corn"subsidies and rice gets the largest subsidies over past 20 years. You won't find "Joe Smith" on the list. All are corporations or associations.

 

[Mark K]

That $40K/year proposal, if passed, will be worked around just like the historic programs.

$40K/year per farm. Joe and Mary and 2 kids have a lot of land. They break it up into Joe's Farm, Mary's Farm, Kid 1 Farm, Kid 2 Farm, Joe and Mary Farm, Kid 1 and Kid2 Farm, etc. and each 'farm' will get $40K each.

The farmers will work the system the same as they have in the past. Its all legal. Its no different than all of the legal 'loopholes' that billionaires use to avoid taxes only farmers use it to legally collect ag welfare.

There's no stopping either of them.

 

[Gobears81]

Links to net income earned by farms:

http://farmdocdaily.illinois.edu/2017/08/forecast-2017-net-income-grain-farms-illinois.html

More dated, but an article that more clearly spells out farm income on a per acre basis:

http://farmdocdaily.illinois.edu/2015/07/projected-2015-net-income-on-a-grain-farm.html

At this point, they aren't exactly getting rich. Not quite like the days of 2013 where the farm implement dealerships were doing bustling business after all of the farmers wanted to purchase massive combines with the high corn prices.

 

[Terrel L. Shields]

they aren't exactly getting rich

I think Progressive Farmer just published a report that average cash rents in Indiana or maybe it was Illinois were $114/acre. Land prices down to $7,500. $9 beans would be a high here. It takes $0.45/bu. just for our trucking.

 

[Elliott]

What differences does it make what the valve (the $ figure) will be in the future? With the exception of computers and smart phones, the relative price of eggs to a pound of beef, to a gallon of gasoline, to a kilowatt hour of electricity, to a the price of a two bedroom house in Fresno, retain similar ratios.

 

[Mark K]

I think Progressive Farmer just published a report that average cash rents in Indiana or maybe it was Illinois were $114/acre. Land prices down to $7,500. $9 beans would be a high here. It takes $0.45/bu. just for our trucking.

https://ag.purdue.edu/agecon/Documents/PAER August 2017.pdf

Purdue Agricultural Economics Report

All you want to know about IN ag. They publish this every year; lots of good info.

Avg. rents haven't been $114 for MANY years. Rent for avg. to poor land, $150 - $175 ish, Good land, $225-$250 ish, Excellent land, $250-$300+.

We have widely varying soils in different regions and land values vary accordingly. SW IN around Evansville, maybe $5-$7,500, central to north central, $8-$9,500.

Trucking in this area is cheaper, $0.25 - 0.30/bu.