KevinM - 1/12/2019 12:15

coup wrote in various posts below:

Would find somebody that farmed 1500 acres and pay them $100 acre to custom farm 500 acres of ground that I cash rented .In order to custom farm the 500 acres, they would need to buy their seed, chemicals , fertilizer, and crop insurance from me. @ $35 acre profit on inputs and ins x 1500 acres = $52,500

175 bu corn x $4 =$ 700- $100 custom farm- $200 for chem; seed, fert- $300 rent= $100 x 500 acres = $50,000+ $52,500 = $102,500 on 500 acres = $205 acre profit.

Will give a custom farming bonus of $25 acre if can buy and handle the grain off the 1500 acres. 125 bu acre x 1500 acre 187,500 bu x $.20 bu = $37,500 - $12,500 bonus= $25,000. Profit on 500 rent acres is now $250 acre.

 

If person that is paying $300 acre rent for 500 acres and profits $50 acre off of person custom farming the 500. From selling fert, chem,seed and crop ins, plus margin from buying grain from the 1500 acres.= $75,000 .On 500 acres of rented ground adds another $150 acre in addition to $100 acre made from renting 500 acres. $150 acre+ $300 rent paid = $550 acre that could be paid to rent ground @ break even. Ground comes up for cash rent bids, who more than likely could pay the most to rent it. Party that rents the 500 and sells inputs and handles grain or the guy custom farming it?

Which brings up another point if the input supplier- grain handler is eliminated from the equation on the 1500 acres @ $50 acre = $75,000 year x 5 years = $375,000 . Better to invest the $375,000 in ones own operation than somebody else's pocket that may end up competing for acres down the road and getting squeezed out of farming by doing so.

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I don't disagree with your concept but have a couple questions. In the third paragraph you use 125 bu/A for the grain handle on the 1500A. Is this a mistake (since you were using 175 bu/A in the second paragraph) or is this meant to reflect a 50-50 rotation of corn and beans?

Is the $35/A profit on the 1500A a blend of corn and beans or all corn?

The 20 cent profit from handling the grain from the 1500A-is that after drying/handling/storage costs? I would assume you would need bins to be able to achieve that return? Are you going to need a scale and a grain dealer's license?

What if the 1500 acre farmer stiffs you for the seed, chem, fert? I would think that you may tend to get those that are in financial stress that will take your deal. What if you had to pay the custom work bill on top of getting stiffed?

Can you give some detail on what operations you expect to be necessary for the $100 of custom work?

What if you were to have an extremely wet spring or fall and couldn't get the crop planted or harvested? You don't have crop ins listed as an expense for the 500 acres-is that intentional?

Thanks for some thought provoking ideas.