With the incredible hay prices we're seeing, this might have been the year for alfalfa, however.
Farmland
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With the incredible hay prices we're seeing, this might have been the year for alfalfa, however.
Yeah, I don't find CSR to be anything better than something to measure possible potential. Even then it's a little dodgy. There has to be some measurement but going off just the CSR isn't something I'd recommend.
Definitely. I know people that got told they were going to go broke trying to pay for that $1900 ground in the 90s. That ground sustains their operation today. I'd have to look, but I'd bet there has always been large appreciation in land over 15-20 year periods.
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I've done extensive research into other types of crop rotations. I would love to be able to rotate into wheat or alfalfa or just something different but you just can't make it work at all by the time you factor in all the associated costs. I'm currently getting my hemp ducks in a line because I think that could be the best opportunity considering all of the things it can be effectively used for.
That crossed my mind while writing the post, but this year is a bit of an outlier there. Alfalfa's usually a several year commitment, correct? We don't grow any, and never have in my conscious life time so I'm pretty ignorant on it's production.
I remember when I was at ISU (this was like 2005-2006), and a farm 3 miles from the one I grew up on went for ~$5500 and it made the Register. It was the classic "two wealthy farmers duking it out over adjacent ground" scenario, but that land doubled in value in about 4 years.
Some of you have probably seen this before, but this interactive map shows profitability of farmland in Iowa at the sub-plot level:
http://mesonet.agron.iastate.edu/GIS/apps/profit/
Changes from 2010-2015 are as you'd expect. I believe they normalized everything to a regional rent basis. I think there is still some pretty significant downside for land prices.
I could see it making sense if you were paying cash and already had a good chunk in other traditional investments. I have a small stake in our family farm, and we just farm what we own. Hopefully I won't inherit a big chunk for 25 years or more, but if something happened soon, I'd probably just hang onto it and rent it out, looking at the ultimate long view. Some consistent cash flow to balance out stocks, bonds and other investments.
http://mesonet.agron.iastate.edu/GIS/apps/profit/
Changes from 2010-2015 are as you'd expect. I believe they normalized everything to a regional rent basis. I think there is still some pretty significant downside for land prices.
I could see it making sense if you were paying cash and already had a good chunk in other traditional investments. I have a small stake in our family farm, and we just farm what we own. Hopefully I won't inherit a big chunk for 25 years or more, but if something happened soon, I'd probably just hang onto it and rent it out, looking at the ultimate long view. Some consistent cash flow to balance out stocks, bonds and other investments.
Things get messy when Greed becomes a part of things.
True. But I lived this before. Land popped to $3,000 per acre in the early 1980’s then dropped to about 1/3 of that value before stabilizing then slowly appreciating till we hit another price bump in about 1996. Then another devaluation followed by slow appreciation until the price pop stimulated by ethanol production.
And that is $160,000 for 80 acres not $1 Million. Big difference IMO.
Agree with you everything you posted. My family saw both sides of the 80s crisis with some being crippled by too much debt in the early 80s that hurt them for 20 years and others being able to take advantages of awesome opportunities in the late 80s with high quality land under $1,000 per acre.
This is how investing always works. The market doesn't matter. Those with cash and some foresight are king. Those with debt or too much greed get wiped out. Or the old saying to buy when there is blood in the street.
Everyone has been complaining about the rising cost of higher education, but $120K each should eliminate or at least limit (depending on the school) the need for taking out a bunch of student loans for those grandkids.
IMO Branstad should not have involved himself in the forced sales of farms. Moratorium was wrong.
Most outside investors make their money somewhere else, then do a 1031 exchange into farmland. Do the harder work, higher hassle of apartments, rentals, etc first for the higher ROI, then use that asset to buy into the lower returning, easier, more stable, longer term investment in land.
