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Southwestern Ontario | Good perspective. I've never heard the 5x value on a corn crop but it makes sense.
What doesn't make sense up here in Ontario is land is heading towards 30x a corn crop... and that is no joke. 200avg dry x $5.50 delivered today = $1,100/ac gross right now. Land sales getting up in southern Ontario to $30,000/ac ($22,000 USD). So that puts my math at 27x. You could argue higher/lower for yields and price but in my opinion there has to be a bubble with those numbers. Sure you could get the "value appreciation" return on your investment but by the time you take your inputs and fixed costs off the gross, how many years till you actually see that money back assuming you hold the land? Cash rate of return is probably somewhere closer to 1.3% by the time you arrive at net income. If paying for land with cash then it's no big deal, but for the guys borrowing to buy land right now are frankly losing money at today's interest rates and grain prices. | |
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10 years from now
