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South Central Iowa | I agree, especially with the belief amongst people that the government will bail us out, but I doubt they do. We’re not near any idle acre point here, nor will we be. I’m talking board prices in the $6’s or below. It’s been 13 years since that, nothing is setup to handle that price. With basis, you’d see cash prices at $5.00 or less in some places, upper $5’s in most.
Personally, I think I am a relatively cheap grower. Variable inputs per acre on soy and $35 for machinery and $35 for living/my labor/profit, puts me at $5.10 with 50 bushel beans. The same break even on 160 bushel corn with the $70 machine and labor is $2.20; fertilizer cost split between them, but both without land costs. So if board prices are $6.00 and $2.60, my cash prices would be around $5.00-$5.50 and $2.00-$2.40. At that point I would be able to pay $0-$30 an acre for land. Some inputs would probably drop, so maybe I could add $20-$30, but $50-$70 cash rent around here would be 1/3 to 1/5 of the peak 6 years ago. If the board reached $2.60 and $6.00, and the government didn’t intervene, that would be the point acres would idle in my area. It wouldn’t be out of choice, but lack of credit at those levels and landowner refusal to accept rents at those levels.
The latter is the interesting one, it would be the denial phase in the stages of grief. Around me, say a landlord was getting $250 an acre 5 years ago, $190 the last few, then $175 last year, but their tenant had to quit because of $6.00 and $2.60. If the new offers came in at $30-$90 an acre or “I’d do a sharecrop with you”, that landlord would stubbornly deny all of it and demand more. He’d think cutting from $250 to $175 was more than he should have done anyway, and some idiot will come along to pay him what he wants, always a new idiot. But at those prices, the idiot might be the guy at $90. There would be more than a few landowners who would sit on it until it was too late and they’d get nothing.
It’s all just a type of game theory; what-if’s on price collapsing further. At some point it idles land by force and would solve the over supply problem. So the market buys at that point of inflection because lower is unstainable to induce production in their minds. | |
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Post trade deal (if)
