From the crowd: Land & $6 corn
Grain market price volatility has been a constant over the last few years for corn and soybean farmers.
But now that prices have about doubled from a couple of years ago, some farmers wonder whether the new price plateau is here to stay. And, more importantly, what does that new pricing structure mean to the future of farming in corn and soybean country?
One way many farmers agree the higher prices will affect their business in the future is in the land market. Not only will prices continue to track the higher grains, but what it will take to secure land may make competing for new ground in the future a whole new ballgame.
"I have been proactive with my landowners by going to them and offering more. Doing this also gives me the chance to explain to the nonfarmer landlords that we are in uncharted territory and I would like to renegotiate if and when grain prices fall back," says Agriculture.com Farm Business Talk senior contributor nwobcw.
That may be an option for the already-established farmer. What about the younger farmer trying to enter the business? Even right now, the numbers make it a heavy lift to get more land. In the near future, higher grain and land prices could only make that tougher.
"If one looks at this trend of paying high rent 3 years in advance, a wet-behind-the-ears young pup looking to rent his first 300 acres would have an over $300,000 "buy-in fee" ($350 x 3 yrs=$1,050 x 300 acres=$315,000, that would take a very benevolent banker)," adds Farm Business Talk senior contributor BA Deere. "An established farmer that kind of thinks it`s a okay deal by knowing his acre base for 3 years and possibly locking in 2 years of grain price might make it work. However it`s looking more like the high stakes poker room."
But, what if farmers and ag businesses took a little more creative tact? Maybe there's a way agribusiness and younger beginning farmers to combine their resources for the benefit of both parties, adds Farm Business Talk senior contributor Jim Meade / Iowa City.
"The next step would be to set a young or smaller farmer up by fronting some of the expenses. Cargill, for example, could go to the farm management agencies and offer them a deal. Then they could bring in the young, hungry farmer who would essentially work for wages. It's not that far out of sight," he says. "Right now, we have a lot of older, independent farmers who have their land clear or paid way down. But, in 10 years to 15 years when the big generational change must happen (we can't all farm into our 80s), there will be room for big money to move in."
Or, take that kind of approach and tie it not to an agribusiness, but another farmer with more resources. A younger farmer could put that sort of plan into action by finding a niche area of production, thereby coexisting with the older, more established farmer better.