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Strategies & Market Trends : Value Investing

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To: Madharry who wrote (46557)	2/13/2012 8:12:49 AM
From: robert b furman	Read Replies (2) of 78753

Hi Mad. My mother lives on 40 acres in Wisconsin. There is some land being lost to development no doubt. The real changes however are farmers paying up to land owners who have their land enrolled in government CRP programs. "Conservation Restoration Programs". These pay a pittance which barely covers the real estate taxes and has associated with the plan expensive maintenance requirements - removal of invasive plant species and every 5 years a discing of the grasses. Local Dairy farmers seek out people on these plans and pay a 10 times per acre rental fee to grow corn and alfalfa which is exclusively used by their Dairy operation. Upon expiration of the CRP plan (a 10 year commitment) my Mother will not only be able to cover her taxes,she will actually have some revenue each year. Dairy farmers are of such huge scale now a days that they have a hard time competing with the corn demand for ethynol utilization. When I went to high school in Wisconsin a large dairy farmer would have 100 head to milk.Now the dairy farmer wanting to rent my mothers property milks 1700 cows. This particular farmer is very well capitalized and not only runs a large herd but also has the equipment equivalent to a crop farmer and instead leases thousands of acres to justify the cost of modern day ag equipment. He leases an area within 30 miles of his farm.He tries to cluster parcels of acreage so they can be tilled /planted with out moving the equipment more than once.He leases to the north and south east and west of his farm as an insurance policy to guard against lach of or excessive rain/wind. In combination, these two forces have driven up the value of farm land as it is defined by the rental value it can generate. These are all excellent benefits IMO. It is quite an evolution in market forces and efficiency technology in both dairy farming and the growth of ag products. Net result is more land going to ag products and less land being paid for by the government to leave the land for native grasses and/or bird habitat CRP programs. Bob

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