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Does it make any sense to 'go in the farm business' 'buy farmland'?
- Thread starter Daal
- Start date
I myself currently live and work on a farm so I will throw in my 2 cents as well.
I live in west central Iowa and farm land here is going for around 5-6k an acre. This is up a massive amount from only a few years ago. Cash rent is around $300 an acre.
Is it a bit overdone? Probably. Will it continue to be a great investment in the future? Likely.
I live in west central Iowa and farm land here is going for around 5-6k an acre. This is up a massive amount from only a few years ago. Cash rent is around $300 an acre.
Is it a bit overdone? Probably. Will it continue to be a great investment in the future? Likely.
What exactly will make it continue to be a good investment? Would even a doubling of the price of cash commodities make farmland a good investment given the current price of commodity * crop yield/ price per acre?
It seems that an efficient farm will yield something in the 3-5% range with a host of uncontrollable variables.
cash rent of $300 per acre in iowa on a valuation of $5-6k?
am i missing gov't subsidies or tax benefits or enhanced production of custom farming or what?
It seems that an efficient farm will yield something in the 3-5% range with a host of uncontrollable variables.
cash rent of $300 per acre in iowa on a valuation of $5-6k?
am i missing gov't subsidies or tax benefits or enhanced production of custom farming or what?
in my area, Arkansas ... if you know something about the biz or can hire someone who does for cheap ... you can actually make some decent roi on cattle farming ... if (and only if) you lease the land.
if you buy it, you might break even if you play your cards right, but it's doubtful
with interest rates like they are i would go apartments if i were young
if you buy it, you might break even if you play your cards right, but it's doubtful
with interest rates like they are i would go apartments if i were young
<i>"What exactly will make it continue to be a good investment? Would even a doubling of the price of cash commodities make farmland a good investment given the current price of commodity * crop yield/ price per acre?"</i>
Aerable land is gaining value because they make less of it every year. How many Super WalMarts, Lowes and housing tracts have you seen replace croplands? How often do you see piles of rich topsoil pushed in a pile to be replaced by blacktop?
Let's not forget that China growing by incredible leaps cannot feed itself to begin with. They are taking our dollars spent on their imported crap and starting to buy farm operations around the world.
We'll see more of that in the next decade. Third-world countries becoming first world with no capacity to feed their population will look elsewhere. South America and North America are two prime sources of fertile crop production, albeit in dwindling open acreage.
Aerable land is gaining value because they make less of it every year. How many Super WalMarts, Lowes and housing tracts have you seen replace croplands? How often do you see piles of rich topsoil pushed in a pile to be replaced by blacktop?
Let's not forget that China growing by incredible leaps cannot feed itself to begin with. They are taking our dollars spent on their imported crap and starting to buy farm operations around the world.
We'll see more of that in the next decade. Third-world countries becoming first world with no capacity to feed their population will look elsewhere. South America and North America are two prime sources of fertile crop production, albeit in dwindling open acreage.
remembered an interview on BNN - Business News Network - Ca
this is the interviewed 'farmland investment' company's site:
http://www.farmlandinvestor.ca/
presume there are similar in the States, also China has been
buying ? some large acerage, see and others:
googled: china buys agricultural land
http://www.nakedcapitalism.com/2008/05/new-imperialist-china-to-buy.html
this is the interviewed 'farmland investment' company's site:
http://www.farmlandinvestor.ca/
presume there are similar in the States, also China has been
buying ? some large acerage, see and others:
googled: china buys agricultural land
http://www.nakedcapitalism.com/2008/05/new-imperialist-china-to-buy.html
Quote from youngtrader:
I myself currently live and work on a farm so I will throw in my 2 cents as well.
I live in west central Iowa and farm land here is going for around 5-6k an acre. This is up a massive amount from only a few years ago. Cash rent is around $300 an acre.
Is it a bit overdone? Probably. Will it continue to be a great investment in the future? Likely.
Iowa here too. Grew up on farm which the old man still owns and rents out. $6-7k per acre he could sell for. The old man wont sell. He calls it his retirement. 2.5 million he could sell it for but rents it out for $65k per year(then he must pay the 11K per year in property taxes). So if you folks think 2% a year is a good return...go ahead and buy farmland. His argument is the tax liability and land could go to 10k an acre in a few years. My argument is it could go back to 2K an acre like it was 8 years ago.
But I respect his decision. With a responsible (protects the topsoil) renter, my parents have an economy proof retirement.
The renters have never had it so good in my opinion. The corn and soybean farmers in my area are getting $50 an acre from the government (two years ago neighbors got nearly $100 per acre). Local rental rates are around $150 - $175 per acre. Farmers are seeing their income up 3X from just a couple years ago, you can see why the rest of this country is shocked by this new crazy farm bill that is veto proof.
The farm bill definitely helps Iowa and a few other states, but to be honest, farmers now have the huge stigma of corporate welfare. The jokes about farmers and their government checks are the topics of conversation at the local watering holes. Adding fuel to the fire is the farmer tax breaks (on par with the Indians)
Can't speak for anyone else, but I own a farm here in NC and it has been going up in value every year. I added acreage in 1990 and paid 1700 per acre. Recently land in this area has been selling from 6,000 to 10,000 per acre.
They have built a lot of houses in surrounding areas, but they are not making any more land. I'm blessed to own what I have.
They have built a lot of houses in surrounding areas, but they are not making any more land. I'm blessed to own what I have.
Does it make any sense to, go in the farm business, - buy farmland? Speculating in Farm Land is not going into the -farm business.
Quote from Daal:
some bulls say that its a 'levered' way to play the ag boom. but if this 'investment' depends on prices going up wouldn't be a better idea to just increase your leverage in a basket of ag futures?Way more liquid, diversified(in case the city or crop your in has a crash), allows you to change your mind plus you dont miss any seinfeld reruns
I've encountered this situation before, I looked into buying real estate in Argentina and Brazil in 2002-03 when it was at depressed levels. In the end I just bought EWZ. 5 years later, not only have I avoided any hassle involved with doing physical transactions (buying EWZ took me about 5 seconds and a few mouse clicks - buying a single apartment in S American would take months of due diligence, fees, travel etc), not only have I avoided the BS of being a landlord and collecting rents...but EWZ has significantly outperformed Brazilian/Argentine real estate over the same period.
Grain futures have gone up way more than farmland. And you can leverage grain futures much easier than farmland.
IMO if you are a trader, then trade. People who are good at the nitty-gritty of "real world" business are usually terrible traders, and vice versa. Even if farmland made 50% more, it is not worth the time, hassle, illiquidity, and extra risk involved. The fact that the financial product has actually outperformed massively is just the nail in the coffin of direct physical investment.