John In Ontario - 1/28/2024 14:57

So in my area land is about $30 000 an acre. All figures Canadian dollars. Good yields are 200 bu corn 50 bu beans and 90 bu soft red winter wheat. Some will do better but you will be in the top half with those yields as whole farm averages Closing 2023 crop prices at local elevator on Friday was 5.14 corn 15.14 beans and 7.15 wheat. These crops are topically grown in a three year rotation of corn soy wheat here. So averaging the revenue is

Corn. 200*5.14=1028
Soy. 50*15.14=757
Wheat 90*7.15=643.5
Total. 2428.5
Average. 809

So on average you can gross $809 an acre here right now.
A 5 yr GIC non redeemable at Meridian credit union is 4.15%. On $30 000 that gives you $1245 in interest per year on that money. I just took the 4.15 off my credit union website. I assume if you walked in with $3 million dollars which is what you need to buy the standard 100 farm here and most farms are 100 acres here you could likely get a higher interest rate. My question is how do I gain anything by buying land in this environment. If you are honest you likely need 70% of gross to grow the crop so that leaves you about $242 an acre for land so you are about $1000 an acre short of carrying land here even if you have the money. Now the last few years the land has appreciated more than $1000 per year but that can’t go on for ever if the land isn’t carrying itself now. So I wonder how the people buying it are actually getting ahead. Even if they have the cash a GIC will give a better return with less risk. I think Canadian banks are fairly stable and not as risky as some of your American banks

I know those that are buying have lots of land paid for or other investors but I still don’t see how if I put down the cash for land I would be further ahead in five years. Even if interest drops by half you still don’t carry the purchase after expenses although the gross would