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Land west of us just traded 3 weeks ago for $4500/ac, some to the east at $3100/ac. I know the 4500 one is true as afsc confirmed, I also know who the guy is and it doesn't surprise me, the 3100 is talk at this point
 

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Land prices won't go down for two to three years of prices like this, then guys will be hurting and going bankrupt or selling out. Funds and farmers. Rental prices are a bit more fluid but most guys I know are in rental contracts at over $50/acre right now for a couple more years.
 

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A realtor told me 20% drop in MB already. I know myself we are not buying any land right now and have been offered a lot in the past two months.
 

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record cattle prices = record grass land prices

The farm land is staying high and moving but sadly it to foreign investors. Even as 600-650 an acre it don't pencil out (I live in a desert)
 

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I have heard of two land deals that fell through so far. Both of them were with a Chinese investor. One is true for sure because I was supposed to rent it from them and when I phoned them back to inquire about it they said they couldn't make any money at what people were willing to pay rent at.

We also dropped some rented land to because the landlords raised the price 30 percent last year right before seeding and now they are fishing for another 20 percent increase.
 

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One young BTO who has been renting a big chunk of his operation has called Ritchie Brothers and the story goes he didn't like their guarantee . Values cannot be sustained with the current market situation . Once you start loosing renters and others sharpen their pencils a little more what do you think will happen ?
 

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So, 4500 dollar land, here are some numbers. 25% down, (That means you have 180 000 of after tax income to pay that much down), leaves 540 000 dollars owing on a single quarter of land.

Payments on a 20 year term would be around 39 000 a year, or 243 dollars an acre.

I just don't get it. Even if you have the cash, it just doesn't make sense. I mean what crop can one grow that nets 240 bucks an acre for twenty years?

IMO even half that price is ridiculous. You can subsidize it with all the other land on the planet, I don't care, it still does not make economic sense. But I guess you have more land. Cuz that is what this is about, right? More land. Life is all about having the most stuff, so people can be impressed.

And then.... You die.

Western Canadian land prices are lower than other areas for a simple reason: The productivity is variable, limited, 100 frost free days. But give us a few decent growing years, and people go cuckoo in the dang head, like drought can't ever happen. Or hail, or frost.

My crystal ball sees this thing crashing HARD within a couple years... I know many think I am crazy, but seriously, show me why my pencil is not accurate, or how that much money for land in western Canada is sustainable or makes any sense at all.
 

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One young BTO who has been renting a big chunk of his operation has called Ritchie Brothers and the story goes he didn't like their guarantee . Values cannot be sustained with the current market situation . Once you start loosing renters and others sharpen their pencils a little more what do you think will happen ?
A lot of youngsters around here have two good years under their belts, and zero really bad years. For whatever reason, daddy has been writing checks for them. Borrowing money for them. What happens when you can't make payments? Anyone know? lol. At these prices, and if you had no payments it is tough enough to make a living.

But wait, if I just had more land to pay for it......
 

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Uthinkyourwet, can you finance with only 25% down? Banks here are wanting 65% down, they see a big down turn in prices coming. What land is selling is being paid for without financing and being compared to savings interest at less than 1%.
 

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The establish farmer regardless big or small, will batten down the hatches, and gear for the worst. The farmers who borrowed too much, too fast will have to be bailed out by family, or downsize to alleviate some debt or just go broke. In Canada we don't have a farm bill to help you, you sink or swim on your own here. When you go through hard times you see who your friends are, and who aren't, and believe me the banker will not be one of them if you owe. I have a couple of old widows and a couple of really old BTO's around me. They should have sold out last year and just retire. I can't see them living long enough to wait for the next spike, when they finally do sell a couple of years from now, that will flood the area and there aren't to many young farmers in our neck of the woods who would be in a position with low prices to buy them out. But that is the time to buy when it all crashes. $4500/ac that is just retarded, might as well take that money and invested in better returns like a couple of Tim Horton's or just by stock in a bank and collect a dividend cheque.
 

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Uthinkyourwet, can you finance with only 25% down? Banks here are wanting 65% down, they see a big down turn in prices coming. What land is selling is being paid for without financing and being compared to savings interest at less than 1%.
Farm Credit Canada does finance at 25% down, pretty sure most banks/credit unions do as well.
The low interest rates have increased land prices and have made people fairly brave when accumulating debt.
 

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I be been thinking about this lately. I had a neighbor try to buy a farm that I was renting out from underneath me. My ego wouldn't let him do that to me, so I bought a farm that will never pay for itself in my lifetime. The price was 2.5x the last farm I bought 5 years ago. A farm not far from me sold for over 10000 per acre last year! It got me thinking about the disconnect between farm land and the farm economy. I think that a lot of the price run is caused by low interest rates, and fear of inflation. We have always had insurance companies come in and buy land, but now in our area, it's teachers unions. I know of 3 large farms purchased by teachers unions from Alaska, Arkansas, and New York. A post above mentioned a Chinese investor, and I know of a farmer here with Chinese money. If you have money you cannot put it in a bank cd and make more than inflation eats. In fact you are losing value. The stock market is not based on any fact anymore, so it's not a safe investment. I believe that this is causing the disconnect. Farmers that are buying land already have money, and are buying for investment rather than to make a living off of it. This is all irrigated farm land.

Is this unique to Idaho? Or is anybody else seeing this?
 

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Might be the odd guy that will still pay too dollar. But the number of people interested in buying or renting more land is wayyy down. So the pool of guys that one might get a tender from will be small. Not sure why guys want to pay or rent at these ridiculous prices and don't really care. I'm just worrying about myself.. Will take couple years to come down if the prices stay down but if basis changes the other direction and prices come back up well then who knows
 

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I be been thinking about this lately. I had a neighbor try to buy a farm that I was renting out from underneath me. My ego wouldn't let him do that to me, so I bought a farm that will never pay for itself in my lifetime. The price was 2.5x the last farm I bought 5 years ago. A farm not far from me sold for over 10000 per acre last year! It got me thinking about the disconnect between farm land and the farm economy. I think that a lot of the price run is caused by low interest rates, and fear of inflation. We have always had insurance companies come in and buy land, but now in our area, it's teachers unions. I know of 3 large farms purchased by teachers unions from Alaska, Arkansas, and New York. A post above mentioned a Chinese investor, and I know of a farmer here with Chinese money. If you have money you cannot put it in a bank cd and make more than inflation eats. In fact you are losing value. The stock market is not based on any fact anymore, so it's not a safe investment. I believe that this is causing the disconnect. Farmers that are buying land already have money, and are buying for investment rather than to make a living off of it. This is all irrigated farm land.

Is this unique to Idaho? Or is anybody else seeing this?
I think that is a very valid point. i was thinking that also, if a had a Few million dollars where would you park it. There a lot of wealthy people who have cash to spare, and land would be a place to hold it. Especially the people who got burned in the 2008 crash, and saw a huge chunk of the saving in the bank evaporate. I was watch a interview with a stock annalist (can't remember the channel) and they were all about agriculture is the place to be, so i can see a lot of heads turning to the land scenario for a safe haven, even if they lose a little. some is better then none.
 

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In our area, even the highest cash rent prices have ended up cash flowing ok. the aggressive young people who don't remember what normal is can't conceive of what will happen in the next few years. If we are in the new normal, land prices in our area will keep increasing....I think we are at the big part of the bubble, so I am hanging on for life!
 

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I dunno. What is with all the low ROI stories? There are many good places to park money, and it is not farmland. Are folks that dumb that they park a couple million in an interest bearing checking account, and then complain about pathetic returns? I know exactly where I would park excess cash if I ever had any, that would average over 8 % (last year over 15%). And it ain't farmland.

Lazy investing equals lazy returns. Aggressive investing = good returns.

Remember our PM, Mr. Harper in that interview in 2008? He said his mother was worried about her investments. He said, on national tv, and took flak for it, that NOW is the time to be investing. The media pounced and called him heartless. Was he right? Ummm, yeah!

I wonder how many took his advice???

He was 1000% correct.
 

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Where do I get a 8% ROI, I can borrow money for 3.5% so you got my attention.
I have places I park the very limited money I have. But seriously, why would I tell people? Do some digging, funds and investments are everywhere.

Sorry, but I had to find my own way. Flooding certain funds is not in my best interest.

I will say, a couple million at 15% is a cool 300 000. There are years you may lose a couple hundred grand, but not panicking is the best strategy. Last time the market had a correction, people ran and got scared and took their money out. Me, like Stephen Harper, I put more in. Buy low, sell high. My rate of return for 13 years, has averaged 8.4%. I only wish I had more money to tuck away.

I do not have a couple million. I used it as a gross example! lol!!!! :D
 
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