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Jesup, IA | Neither piece of land sold, nor the rent would work based on my costs. If you plan to keep your machinery fleet up, and put on P&K, you need 200 bu corn/65 bu beans to pay $250 rent in my budget. Three years ago though, I'll bet an auction would have brought $425 vs. a still impressive $333.
Now on the land sales, I can hypothesize what happened. I'll guess the buyer of the 40 had the money in the bank, favors land over the stock market, low interest cd's, etc. Has good tenants and thinks generationally. They probably should have bought an oil well if they wanted the biggest chance for gain, but that's not their game. Their snowball is probably big enough that it gets bigger on every revolution down the hill, even if temperatures are a bit above freezing.
I'm sure the buyer of the 120 (whom I know) has something cooking on the backside. They are most likely selling a piece they like less and rolling into improved quality, have an investor landlord who will take a 3% return, or simply has enough cash to buy or put down a down payment big enough to make the annual payments about the same size as rent. But even if they are "rolling" or working with an investor, somebody is buying land at $8100 ish.
So I kind of get why the purchases happened, but the rental price seems hard to justify. I just expected the rental/purchase markets to separate more because they are driven by two different breeds of cat. I fully expected the rental market to fall further than it has, as "asset light, rent-it-all, make it up on volume" types watched margins go negative.
Meanwhile, I look up and down the road, and 7 of 8 of my neighbors really haven't changed much in the past decade of prosperity. They have the same acreage, grow about 100k bu of grain a year, and have sold that grain for $1-2+ more per bushel for almost a decade. Besides putting $7500 of vinyl siding on the house, and trading the 20 year old tractor for a 5 year old machine, they don't seem to have spent much of the extra million in grain revenues received since ethanol changed everything. They don't trust financial securities, and if the farm across the road comes for sale, it's pretty hard to bid against a family with hundreds of acres of debt free land with cash in the bank. They don't denominate life in money, and if it takes $10,900/acre to buy something they do trust, it happens.
So that's a long winded answer to why it sold like it did. These prices are not sustainable with $3/$8 corn/beans. But if you have the money, or think this is the bottom, I guess those prices make sense.
Thanks for the kind words. But I must admit, I don't feel so smart. I am as undersold as most others here on NAT, and my margins for the upcoming year are a long ways from the black at present prices. This is the phase of the cycle where those who ventured little and squirreled it all away for a rainy day look smart.
Edited by Ben Riensche 1/24/2016 16:22
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Sale: $10,900/$8,100 Rent: $333
