£250/acre rent question

[strip-till-phil]

Could someone please explain to me how this works as I don't understand it

Farmer takes 80 acres @ £250/acre on 5 year agreement.

It's approx 7 miles away and he plants it with Winter Barley with current price just under £100/ton

Plough based system.

Am I missing something here

 

[ARW]

Simple. Greed mixed with stupidity. Probably got a small willy too

 

[Badshot]

He's counting on things picking up, but most likely will be crying out needs a rent review. Plus some seem to like spreading these high rents over their entire acreage, owned and rented. Then say they only pay an average of say £100/acre rent. It's madness imo, but a fact of life.

 

[Roger Perry]

Obviously this guy was an early winner of the lottery and by the action you described above he is doing his best to deal with his tax issues

 

[le bon paysan]

This has been put on before, but worth reading again;

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!

 

[eagleye]

We just reckon they use a solar powered calculator to do the figures during the dark winter evenings.

 

[Thick Farmer]

This has been put on before, but worth reading again;

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!

I need to save this post and put it on my kitchen wall!

 

[le bon paysan]

I need to save this post and put it on my kitchen wall!

I saved it to my desktop.

 

[Kevtherev]

Bonkers rent.
£50 acre much better [emoji106]

 

[ARW]

I need to save this post and put it on my kitchen wall!

I can see it happening to different scales of farmers as we speak!

 

[Mkfm]

This has been put on before, but worth reading again;

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!

So the moral of this story is......... If you want to pay a high rent don't buy a lexion! (But what a true to life story)

 

[Agrispeed]

As an alternative view, you can see why rents are expensive, as some would look on it as the farmer is getting £80/ac for nothing, so why should rent not reflect this?

Then again around me, rents seem to be based on the spud boys paying £300/ac for the nice big fields, or the Horsey fraternity paying much more for the less nice land!

 

[Derrick Hughes]

Thank goodness we live in a free country and the nosey parkers have no power

 

[Clive]

Could someone please explain to me how this works as I don't understand it

Farmer takes 80 acres @ £250/acre on 5 year agreement.

It's approx 7 miles away and he plants it with Winter Barley with current price just under £100/ton

Plough based system.

Am I missing something here

look on the bright side - there will one less idiot to bid against 5 years from now !

 

[Grassman]

So if you go to the bank to borrow money to rent extra land and your figures are based on spreading the rent cost over your owned land will they lend to you?

 

[Clive]

This has been put on before, but worth reading again;

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!

thats should be made a sticky thread in the arable section !!!

 

[wasted years]

So if you go to the bank to borrow money to rent extra land and your figures are based on spreading the rent cost over your owned land will they lend to you?

Thats your decision not theirs, they are only looking to satisfy their rules to lend not yours.If the owner of a farming (or any other kind ) business isn't able to decide if extra acres are a good idea , why should the bank?

 

[wasted years]

Don't forget that the arable farmer is at the moment seeing quite a drop in fuel costs, this will surely impact on sprays fert etc and of course fuelin the lexion(s).

 

[caveman]

thats should be made a sticky thread in the arable section !!!

Yep.
With the addendum to go spring cropping.
The cover crops will give you enough sheep keep to sell that will pay the ground rent and negate fertiliser requirements.

 

[Brisel]

Don't forget that the arable farmer is at the moment seeing quite a drop in fuel costs, this will surely impact on sprays fert etc and of course fuelin the lexion(s).

I see what you did there. Fuel price falls have little bearing on fertiliser prices & the incremental agflation in everything else soon swallows that saving up anyway. Energy costs go up like a rocket then come back down like its stick.