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View Full Version : Farmers = New Rich acording to Wall Street


Tim Horton
09-24-2011, 02:23 PM
Was sitting waiting, and picked up a July 2011 Time magazine.

Was an article by some Wall Street type that says farmers will be getting rich.

With some kind of "study" that was done by Wall Street types. With grain prices where they are now, and expected to be by fall, world demand where it is expected to be, and all, farmers will be rich.......... However they did acknowledge that machinery and land prices would play a part in this. Hinting more so in some regions and less in others.

(curmudgeon mode on)

What I thought I read between the lines, is that Wall Street thinks there is some money to be siphoned off this gross income source. I'm sure this was all studied and prepared with a passing grade attached to each monthly cash sheet during the remainder of the year.

Even though they did mention land and equipment, (tangent equipment that can be depreciated) there was nothing said about other consumables. I'm sure none of those people have seen a 200hp tractor at an ag fuel pump with about $400. on the meter for a fill up.

Sounded like Wall Street looking to expand there diet of prey........... What I see here, in the mud within arms reach of a corn stalk and how many passes over the ground it took to get this, tells me different..........

KnowwhatImean....... ($1.oo and my opinion = a cup of coffee)

Facts, details, comments, respectful replies to others comments please.

Wyo

Grouchy-Hermit
09-24-2011, 03:39 PM
I read a while back that big investors are buying farmland on a large scale and driving up land prices. I reckon that this isn't good for average Joe as it likely signals that food will become scarce and even more expensive at some point in the future, especially since we are converting corn to fuel. As the world population grows, we will see severe pressure on our abilities to feed everyone. Investors are positioning themselves to take advantage of this.

JarDude
09-24-2011, 07:01 PM
If the "farmer" is the landowner then he probably will become rich. This is nothing new.

Not all farmers own their land. Rising prices hurt these as much as help.

That said corn has dropped in price big time over the last week or so. It's down to within pennies of $6/bushel.

Cash rent will be $700/acre for some in central IL next year. It won't matter how good the price of corn is for these guys because they will fail unless they get a bumper crop. Pretty tough to plan on a bumper crop.

Dame
09-25-2011, 08:02 PM
If the "farmer" is the landowner then he probably will become rich. This is nothing new.

Not all farmers own their land. Rising prices hurt these as much as help.

That said corn has dropped in price big time over the last week or so. It's down to within pennies of $6/bushel.

Cash rent will be $700/acre for some in central IL next year. It won't matter how good the price of corn is for these guys because they will fail unless they get a bumper crop. Pretty tough to plan on a bumper crop.

Non corporate"Farmers" who own the land and the equipment and actually operate the farm will not be making the money.

The investors who invest in farmland generally do so though investment funds and the farmland is generally held as speculative only and out of production. The investors bleed of the gross combined with the cost of land taxes, equipment, labor and other inputs are still going to put farming as a net loss investment of ones time and money. Production of food will decreases as the land lays untended and the paper title used as a negotiable instrument. Poker chips would do just as well.

JarDude
09-25-2011, 08:51 PM
Non corporate"Farmers" who own the land and the equipment and actually operate the farm will not be making the money.

How so? Farmers that own their land are making money hand over fist. Even if he breaks even "farming" it and only puts the cash rent in his pocket he is doing well. Rent is $400 an acre around here. If a guy has 500 acre he can make 20k doing nothing.

The investors who invest in farmland generally do so though investment funds and the farmland is generally held as speculative only and out of production. The investors bleed of the gross combined with the cost of land taxes, equipment, labor and other inputs are still going to put farming as a net loss investment of ones time and money. Production of food will decreases as the land lays untended and the paper title used as a negotiable instrument. Poker chips would do just as well.

This may be the case sometimes but certainly isn't the norm. No investor is going to shell out $8-14k for an acre of ground then ignore the $400-700 a year he could bring from rent.

Plowpoint
03-04-2012, 05:33 AM
They say history repeats itself and that is what is going on here...

In the 1970's, Carter (a farmer himself) suggested farming was corporately viable and they flocked to invest in farms. This worked well because while other industries contract in tight economies, like the end of the 1970 era, farming typically does well. That is because people still must eat and so as the other industries fall away, like housing, construction, finance, etc, farming is this bright spot that looks untouched. The problem is farming trends occur over broader periods of time.

By the time other industries make a come-back, farming is cresting the wave. The influx of venture capital saturates the industry and the gross agricultural product climbs to new highs. As yield increases, it suddenly beats out demand. Suddenly the price plummets and farmers are left with high operating costs and lower profits. Wall Street backs out and only the hardy survive. If you do not believe me tell that to the 980 farmers that committed suicide during the terrible farming years of the 1980's. To a slightly lesser degree, this happened 2 years ago when the price of milk plummeted. To this day, despite the loss of American Dairy Farms, the supply of milk far out paces demand and there is too much milk on the National Food Chain.

Currently we are on that crest. Look at the corn yields, some fields are hitting 500 bushels to the acre, when just a few years ago record yields were only 280 bushels to the acre. On our own farm where we go by tonnage and not bushels, our nutritionist said that we would never see higher valued corn then in 2009, and that was at 20 tons to the acre. Due to hybrids and GMO seed, we are hitting 24-26 tons to the acre in 2011 with even better quality. With GMO seed about ready to transcend the political arena of the wheat commodity group, you are going to see increasing yields there too.

When the bottom drops out, and it has too because price and yield can only stay high for so long in a free market system, the investors will scatter as they always do. This is a cycle that is repeated throughout history in the USA...and really before the USA as well.

We have been farming here since 1620 and have documentation to back all this up from diaries. This very thing happened in 1871, 1898, 1921, 1950, 1982 and coming to a corporately financed farm soon.

Plowpoint
03-04-2012, 05:54 AM
Quote By Wyobuckaroo in their orginal post:

"Even though they did mention land and equipment, (tangent equipment that can be depreciated) there was nothing said about other consumables. I'm sure none of those people have seen a 200hp tractor at an ag fuel pump with about $400. on the meter for a fill up."

This is not exactly what it appears. I will say that you are a bit off, a 200 hp tractor is small on todays modern farm. My family has just a small family dairy operation and our tractors and trucks approach the 400 hp range. But fuel consumption of these tractors are actually very low.

In years past when we used smaller tractors (200 hp) we would average 3 gallons per acre to till our corn fields. Even though we use the same minimum till methods as we did a few years ago, because we now have 400 hp tractors toting 33 ft-45 ft disc harrows instead of the old 17 ft disk harrow, we are getting more acres done for less fuel consumption. In fact we are down to 1 gallon per acre...a third of what it was...by going to larger tractors. Even then, we do not approach the 3/4 per gallon per acre that the mid-west farmers are achieving because they can do no-till which is not feasible here in Maine.

The same line of thinking can be applied to our grass land management. With bigger mowing machines, we reduce the number or passes required, and with self propelled choppers (combines) reaching 500 hp, we can do more with a lot less fuel. Yes the cost of equipment is more, but the price is easily penciled out when compared to fuel savings.

oldtimer
03-05-2012, 02:23 AM
Yes, there's money to be made in farming.

People who have money sitting around to invest have bought up land in these parts just to rent out as the rental income off that land is a far larger return on their investment than anything else.

A two or three thousand dollar an acre investment can bring you from 125 to 200 dollars an acre in cash rent and you still own the land, and they ain't making any more of it.

Those with a farm that is paid for are making good money.

Many of the big operators are pushing the little guys out in this rent bidding war. Around here we have unscrupulous shysters who go around and talk older people into getting rid of their current tennants and renting to the big land grabbers. Then this guy is rewarded a ten to twenty dollar an acre finders fee for crooking folks out of their livlihood.

It happened to my next door neighbor who had rented the same farm for thirty some years on shares but now he has to pay big cash rent if he wants to still farm it.

We have farmers crying because corn is only around six bucks a bushel. The entire country has been reduced to dirt farmers and livestock raising is gone to the factory farms.

A young fellow could never borrow money to buy a farm and make a go of it today. You'd have to have old money to spend or inherit a farm.

In our small rural towns the teachers are underpaid, the fellow at the filling station is underpaid, our main streets are dying out as well as our churches but the farmers have lots of money, but they'd squeal like a pig caught under a gate about the price of getting a dad burned tire fixed or about what the folks are making who take care of their kids and give them an education.

It's sickening. The farmers driving around in brand new pickups which they get to take off their taxes. The rest of the folks in the country who work for a wage not only can't afford a new vehicle, they don't get to take it off their taxes.

There are all kinds of tax breaks available to farmers that the rest of the world doesn't get, so yes, the farmers are the new rich. It didn't used to be that way but the political scene today has not only made the farmers rich but made them some of the biggest welfare recipients in the United States. Just mention cutting the farm program and then you'll really hear an outcry but these same folks are putting up a fuss when they cut funding to their local schools or when some poor fellow on Main Street had to go out of business because the rich farmers took their business to the big city instead of buying locally.

It's a shame we ever got a tractor bigger than an M Farmall, then the country would have still been full of people, folks weren't rich but they got along. Main Street was full of businesses, the schools had plenty of kids and our little churches were still full.

Plowpoint
03-10-2012, 10:09 AM
I could see where in the corn belt and some of the other States where Ag is bigger that is true, but here in Maine I can tell you, farmers struggle and always have. As my Uncle said the other day, their farm is breaking even and he is happy because they aren't losing money for once. What other business do you know of where a person works 18 hour days, 7 days a week and is happy that they are breaking even? Farmers are tough that is for sure.

We have one of the largest dairy farms in Maine, yet at 1200 cows, it is still small by most national standards. We are far from rich too. Right now my attorney has 3 dairy farms filing for bankruptcy and that is just local, in all there is only about 350 dairy farms left in this state, so it is not good.

But you are right, farmers have laws that allow them to operate as no other business structure does. Part of that is because we operate in the most heavily regulated business environment in the world. We buy most items at retail prices and turn around and sell them at wholesale prices...what other industry does that and still makes a profit?

As is, the Maine Milk Commission sets the price of milk, and does so about a year in advance. That is convenient, yet despite the US Government being the largest consumer of fuel in the world, they cannot dictate what the price of fuel will be tomorrow. I say if this is a free market society, let the milk prices have speculators and see how high (and low) the price of milk goes....

...ahhh we can't do that though. Milk is a staple of the American Diet and if the price goes too high people will buy soda instead of milk. Can you imagine the real-life cost of health insurance and dental care if people could not afford milk or other quality food? Unfortunately it is true; the US Government wants cheap food and have always gotten it.

Justacowboy
03-10-2012, 11:22 AM
In the valley that I just moved from the big farmers are very rich and pushing the small farmers out.. And the Dairy's are also.. we have I believe to be the 2nd largest privately owned dairy in the world..

Plowpoint
03-10-2012, 06:37 PM
BTW: If you think American Farmers are dependent upon farm subsidies, try going to Ireland and other European Nations. They get kick-backs for weaning calves...now what farmer does not do that? It is insane what they get paid and for doing the most mundane things. I will say though, that over in Ireland a big dairy farm has 70 milking cows and 100 acres is a sizable farm. :confused: