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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: nspolar who wrote (33831)	11/23/2003 6:33:32 PM
From: Joan Osland Graffius	Read Replies (1) \| Respond to of 36161

nspolar, Yes, I grew up on a farm and we now have the 5th generation farming the land. My grandfather homesteaded and purchased a fair amount of acreage during the 1930's for taxes and each generation has been adding when land prices have been cheap without borrowing capital to buy. Most of the farmers that have gone bankrupt during the last 30 years was because of the things you noted. The farmers that are still in business have their land, buildings and machinery paid for. When dad was going to purchase something like a car, truck or machinery we would sell grain to the market to write the check. The price of farm land depends on the closed bids that are offered when land goes up for sale. And the level of these bids depend on the ability or willingness of people to buy the land. The farmer will offer the land with a minimum bid price and the highest bidder will be the winner. You can have large swings in property prices with this system. I do not know how the farm loan institutions are selling the land that has been taken over under bankruptcy right now. They used to have auctions, but I would have to ask just how it is handled today. The cost to start farming is huge these days. Machinery is expensive - we are talking $100,000 for a tractor, $200,000 or more for a combine, etc. One can buy used equipment and the price of this depends on how many farmers are going bankrupt at any instant in time because this equipment is sold at auction. This year was a fairly good year to buy new machinery as the manufactures were discounting prices rather aggressively. They were giving nice discounts for cash purchases. John Deere must have been hungry for cash. <g> For your information the land in North Dakota's Red River Valley which is excellent producing land is getting around $70 per acre rent. The taxes are a nightmare as there are countless ways that one can establish a tax rate for the land. There are tax credits and all kinds of loop holes that have been put in the farm land tax codes at both the federal and state levels. If one wanted to buy and rent to a young person that is farming it all depends on what kind of return on capital you expect. I agree if the global economy goes in the tank commodities will go down in price with everything else. The future is quite uncertain at the present. I would rather have a granary full of production than be holding US dollars. <g> Edit. I would not consider buying farm land today unless I was using cash. I would also have sufficient capital to cover a few tough years. Borrowing to buy could be a very serious problem.