Yea, I know. I've said some of those to myself at times... and then I had to go think about it.

See, the reason why I ask this is that I went through this exercise when we got into farming at the top of the dot-com bubble and we could self-finance everything. We had to - since farm lenders won't give any loans to people without farming experience. So we went into the farming business with no banker other than ourselves.

When I pushed a pencil around on the issue, I came away with numbers that simply do not support land prices much above $2K/acre, depending on the taxes in your state as well as other input costs, regardless of state, crop, taxes, etc.

It wasn't an accident that we farmed in Nevada. Farmland prices were low, there was a niche market, a purely cash market that I could understand (someone trying to get into farming, learning everything about farming AND then marketing... c'mon! How fast can a young person possibly learn all this stuff that requires quite a bit of experience?) and a relatively solid market. Real estate taxes were low, all taxes were low. In other words, we farmed where our costs (in 1998) were as low as possible because in 1998, farming returns looked pretty slim and grim. So we budgeted and planned for low prices going forward.

When I see prices for land in the midwest, coupled with how volatile your markets/crops have become, how much volatility you have in your input prices, etc.... I simply do not understand how anyone could buy $6K/acre naked land and make it cash flow without "subsidizing" that land with cash from somewhere else in the operation. We paid $1200/acre for land with irrigation equipment already installed, four wells drilled, a house, two shops, a hay barn, a cow shed and crops in the ground and while we made a profit by farming it, it wasn't a huge profit.

When I see a price of $6K for ground without irrigation equipment, with no perennial crop already put in, no structures, etc... I'm sorry, but from my admittedly limited but purely cash experience in farming and real estate - those are prices for land that is going to be cut up for development within the next five years. That's not land for farming anything but houses.

Where my question comes from is that when I start pushing some numbers around (eg, 150bu/acre, $4/bu corn) we start with $600/acre/year revenue and start hacking expenses off of that. I come away with numbers that simply do not support $6K/acre land - no how, no way. The only way this land purchase can be supported is to be subsidized, whether it is the free cash flow off base ground they inherited, the in-town jobs, the government payments, etc, or someone 1031'ed into it and they weren't terribly worried about getting the price of land down, but rather avoiding cap gains taxation.

I'd welcome someone proving me wrong.