- Location
- Top of the Chilterns
He finds another bank, buys a new quadtrack and a whole load of massive kit, and then just as he's about to get cracking he thinks he's doing the wrong thing, sells the lot and buys a dairy herd.
whats his profit when its at 220? id imagine he could shift both lexions and have no finance to pay through the poorer years?He has an okay year (almost as good as he used to be doing half the work), then his rent, machinery and input costs goes up.
yes and gets full tax relief on all the kit and has no finance to pay going forward, at the end of bobs 15yr tenancy he owns 1,000,000 worth of machineryHe finds another bank, buys a new quadtrack and a whole load of massive kit, and then just as he's about to get cracking he thinks he's doing the wrong thing, sells the lot and buys a dairy herd.
Remind me why you aren’t doing it?yes and gets full tax relief on all the kit and has no finance to pay going forward, at the end of bobs 15yr tenancy he owns 1,000,000 worth of machinery
what happens to bob when wheat hits £220/t?
nonsense anyone at that scale needs to be selling freelyHe doesn't get that price because he had to sell the vast majority of his wheat forward at £170/tonne to placate his bank manager who is concerned at his massive borrowings.
his borrowings will be small if hes only renting it, different if he was buying landHe doesn't get that price because he had to sell the vast majority of his wheat forward at £170/tonne to placate his bank manager who is concerned at his massive borrowings.
no estates round here giving out big blocks like that, unheard ofRemind me why you aren’t doing it?
You imagine wrongly.whats his profit when its at 220? id imagine he could shift both lexions and have no finance to pay through the poorer years?
u got some figures?You imagine wrongly.
u got some figures?
Found it
I would quite like to expand but i am often coming up against contract farmers who seem to want to farm half the world and will pay stupidly high rents to do it. In my view if the rent doesn't stack up on its own its too dear.. end of. I'd rather they make a loss than me!
So lets take our (very lucky!) farmer who owns a 1000ac with no borrowing and insert some basic figures. I will call him Bob and I will assume a uniform (very optimistic!) profit level and that economies of scale are already achieved at the 1000ac level so there will not be any real cost benefits of increasing in size.
So,
Things are going well for Bob and he makes £200/ac profit after all fixed/variable costs on average across his 1000ac giving him a total profit of £200,000 a year.
1000ac next door comes up for rent at £120/ac, he'd be a fool not to take it!, so Bob does and spreads the rent of £120,000/yr across his 2000ac. Works out at £60/ac and assuming that everything is still going great and he makes a profit of £140/ac across both units and earns a very tidy £280,000 a year. His percentage profit has dipped and he is doing more work, but hey lets not worry about such things his turnover's gone up and he has more land than any of his neighbours!
Through kissing some land agent's behind he then gets his big chance, 2500ac almost half the local estate! Its £200/ac with no sfp. Bob's pleased, he would have gone to £300/ac, the lands worth £12,500/ac after all and his Grace deserves to make money as much as the next guy (Bob doesn't realise that his Grace's family got the land many years ago for killing one of the King's rivals so it didn't really cost them anything). He will now have 4,500ac! So Bob dives right in on a 15 year lease!
Bob now has 4500 ac, more land than anyone in the county. He has a total rent now of £620,000/yr or £137/ac. So what?!? £137 is less than a tonne of wheat so it doesn't matter.
Conditions remain the same in year three, so he makes a profit now of £63/ac across all 4500ac, a tidy profit of!!... £283,500... hhmm. Bob is only making £3,500 more than last year on 125% more turnover.. But so what! Bob now has 4,500ac and he just bought 2 Lexion 770's... and built a new £500,000 grain store, he's now got a website and gives talks to fellow farmers.. he's the envy of all his neighbours... And he's on Mr Claas's xmas card list! He gets to shoot with his Grace! (even if it is just the keepers day) His Grace loves Bob, (he calls him his 'tame farmer') he has never had so much spare cash and doesn't have to deal with those pesky tenants anymore! If Bob keeps in with him he might get the rest of the estate, Bob will definitely go to £300/ac to get all that land, Bob'll have 7000ac soon!
Year 4 comes along, its a wet one, the crops were sown in poor conditions and come harvest he is struggling to cut 4500ac.. even with his two Lexion 770's! in his head he would have been done combining in less than 15 days cutting (even with all those small fields and road miles required) but they won't cut much when its raining or their bogged or got a power washer up their spouts to wash the mud out.
The wheat price has also dropped, and that combined with slug pellets costs and breakdowns means that his notional profit before rent comes back to £100/ac, and at the end of the year he goes from a £63/ac or £283,500 profit in year 3 to a loss of -£37/ac and a total loss of -£166,500 in year 4.... and thats before taking into account the Lexion 580 that he had to buy to get the wheat cut before it sprouted... but thats not too important it only cost £180,000!?!.. All that for about 4 times the work he used to do!! He decides to pass on the rest of the estate.
The cereal market then gets more volatile for the next few years (unfortunately Bob has to sell forwards every year to keep the bank manager happy so he can't be fussy about prices) and other costs go through the roof, he's still got 13 years of his lease to go and wishes he had never seen the 2,500ac. When he eventually gets out of the lease he now owes the bank so much that they tell him if he ever tries taking on more land they will call in the loans and shut him down. His Grace gets some new tenants, hopefully they wont mind the derelict steadings.. Progress eh!
Found here on post 5 https://thefarmingforum.co.uk/index.php?threads/£250-acre-rent-question.99754/#post-2007566 by @le bon paysan
this seemed like a good post in 2016 after a run of bad grain years, it doesnt look quite as clever now grain has been quite good the last 3 years and looks good again for at least the next couple, bob could have fairly turned things aroundHere you go.....
Move south and show us how it’s doneno estates round here giving out big blocks like that, unheard of
Bob might not have got much drilled in 2 of those 3 years.this seemed like a good post in 2016 after a run of bad grain years, it doesnt look quite as clever now grain has been quite good the last 3 years and looks good again for at least the next couple, bob could have fairly turned things around
Have you been and offered any lairds £250/ac?no estates round here giving out big blocks like that, unheard of
nonsense anyone at that scale needs to be selling freely
mabye but if he were up here hed prob have managed no probBob might not have got much drilled in 2 of those 3 years.
ive read it, the stuff at £120/acres not bad given current prices especially if its land that can yield?You haven't read the story properly then.