£250/acre rent question

[Brisel]

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

No, you are correct. He won't make anything out of it & will be a busy fool. @le bon paysan 's post sums it up nicely.

The annoying thing about this is that some of these speculators are so ignorant of what it costs to grow a crop that their substantial balance sheets will permit them to carry on doing this for the entire duration of the agreement. If they do wake up or the bank manager reins them in then there will be another eager young buck ready to take their place. They will have been taught at ag college that they can farm so much better than the old boys & they need more land to make room for them at home on the family farm anyway.

There will be jam tomorrow - the Chinese will have a couple of disaster harvests & repeat the Great Russian Grain Robbery, just like the history books wrote in the '70s.

 

[franklin]

£250/ac x 5 years = £1250.

Would have to know more about the land. The barley may not pay, unless s/he makes 110 conventional bales of straw from it and sells them for £2 each, then gets turnips in and sticks sheep on.

If one of those years at the end was a virgin crop of spuds, would that make a difference to the calculation?

What if the landlord was old and being the tenant would give them first crack at buying it if the landlord carks it? Worth a premium perhaps?

Could be that the tenants 1's look very much like 2's? If tenant is farming it with existing kit and staff, then its not a large cost in extra fuel.

Perhaps there is more to it than a simple "gosh, look at the headline rent"?

 

[Brisel]

Of course, if you only work on the basis that the are is farmed on the basis of marginal cost only then the accounts look better. @strip-till-phil - how many acres is the tenant farming already?

 

[Surgery]

£250/ac x 5 years = £1250.

Would have to know more about the land. The barley may not pay, unless s/he makes 110 conventional bales of straw from it and sells them for £2 each, then gets turnips in and sticks sheep on.

If one of those years at the end was a virgin crop of spuds, would that make a difference to the calculation?

What if the landlord was old and being the tenant would give them first crack at buying it if the landlord carks it? Worth a premium perhaps?

Could be that the tenants 1's look very much like 2's? If tenant is farming it with existing kit and staff, then its not a large cost in extra fuel.

Perhaps there is more to it than a simple "gosh, look at the headline rent"?

Unfortunately having first crack , first refusal is not wroth the paper it's written on nearly a kind way of keeping the peace for a little longer in the others benefit.

 

[strip-till-phil]

Of course, if you only work on the basis that the are is farmed on the basis of marginal cost only then the accounts look better. @strip-till-phil - how many acres is the tenant farming already?

Around 300 acres, none of which he owns

 

[Brisel]

Around 300 acres, none of which he owns

So the 80 acres represents a quarter of their cropping, probably more. Hardly marginal cost then. Any buildings with it?

 

[strip-till-phil]

No buildings,

Looks he has won the lottery then and not told anyone

 

[Brisel]

 

[wasted years]

No buildings,

Looks he has won the lottery then and not told anyone

These kinds of threads come up on here on a regular basis, What I don't understand is why do you care what others do?
Of course we are all free to talk about what we want , within the law but really? Let others do what they want, its no business of anyone else.

 

[Brisel]

What I'd really like to know is how these bidders have made their business plans stack up, because the basic economics of 80 acres of winter barley, wheat etc just don't add up. As you say, we'll never know what drives them.

Since when has the market for land rent tenders actually represented the productive earning capacity? It annoys me that the demand for extra land has distorted the values because it starves new entrants of opportunities for getting into the game.

You don't have to comment on these topics if you don't want to

 

[Brisel]

@wasted years - sorry. My last comment of my last post was inappropriate. Please keep talking

 

[multi power]

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?

I can't see how that could work, the land had to be bought so has a cost, even if long since paid for then it still has a value

 

[caveman]

Could the total rent less bps payments (maybe £900) be got back after five years by cropping with lower yielding spring cereals, oats, barley, beans maybe and with hardly any inputs apart from heavy sheep grazing on volunteers and a few turnips etc to build up for a bumper wheat crop at the term end?
Serious question as I have no idea on arable.

 

[7610 super q]

Could the total rent less bps payments (maybe £900) be got back after five years by cropping with lower yielding spring cereals, oats, barley, beans maybe and with hardly any inputs apart from heavy sheep grazing on volunteers and a few turnips etc to build up for a bumper wheat crop at the term end?
Serious question as I have no idea on arable.

No.

Edit: Don't know much about sheep, Perhaps they're seriously profitable ?.............

 

[ajd132]

dont forget Bob now needs an arable manager, an assistant manager, a foreman, 2 full time blokes, brand new trucks for them, a secretary, a posh office, a large board/meeting room, someone to do his gatekeeper for him and now a gamekeeper on his own land as a large shoot is now needed to pay back all his new friends.

 

[ajd132]

Oh and numerous agronomists to tell him what blanket chemical applications to do that could be found in the farmers weekly or cpm if he had time to read them or even better do BASIS and do it himself! (Too busy planning his application for farmer of the year award)

 

[wasted years]

@wasted years - sorry. My last comment of my last post was inappropriate. Please keep talking

Quite mild in comparison to a certain feathered contributor.
£250 per acre rent is 10k per acre over a 20 year mortgage without the interest, my family bought a farm in 1993 for £1500 per acre and rented one at £80 per acre. Over 20 years we could have bought another farm (20x80=£1600) without the interest. I couldn't farm at £250 per acre rent and over 15 years (used in example ) he would have been better to buy at 10k you could argue, at least he would have been worth more at the end .

 

[ARW]

Quite mild in comparison to a certain feathered contributor.
£250 per acre rent is 10k per acre over a 20 year mortgage without the interest, my family bought a farm in 1993 for £1500 per acre and rented one at £80 per acre. Over 20 years we could have bought another farm (20x80=£1600) without the interest. I couldn't farm at £250 per acre rent and over 15 years (used in example ) he would have been better to buy at 10k you could argue, at least he would have been worth more at the end .

Cheaper to buy it than rent it!

 

[4course]

the other thing to note is that to get his inputs BOB by year 3 is totally commited to selling his produce to and buying his inputs from a large multinational for ease of cash flow management, who also helps and advises on the agronomy and cropping plan, of course for his loyalty he does pay a small premium and receive slightly less but he does get to go on an all expenses paid trip to some god forsaken place as an agricultural study tour and gets to be treated as the forward thinking progressive farmer of his generation and by the end of year 5 has every new bit of shiny gear replaced on chucky and a humungous overdraft to service the initial loan which is growing every year he will of course embrace every new fad going over the last years on the grounds of reducing costs so will have a yard full of expensive rusting gear then the decision to sell the offlying acerage that grandad bought and father struggled to pay for is made on the basis that money has to be working not tied up but fortunately that has increased in value 5 fold and so bob is now in a position to expand again

 

[wasted years]

the other thing to note is that to get his inputs BOB by year 3 is totally commited to selling his produce to and buying his inputs from a large multinational for ease of cash flow management, who also helps and advises on the agronomy and cropping plan, of course for his loyalty he does pay a small premium and receive slightly less but he does get to go on an all expenses paid trip to some god forsaken place as an agricultural study tour and gets to be treated as the forward thinking progressive farmer of his generation and by the end of year 5 has every new bit of shiny gear replaced on chucky and a humungous overdraft to service the initial loan which is growing every year he will of course embrace every new fad going over the last years on the grounds of reducing costs so will have a yard full of expensive rusting gear then the decision to sell the offlying acerage that grandad bought and father struggled to pay for is made on the basis that money has to be working not tied up but fortunately that has increased in value 5 fold and so bob is now in a position to expand again

Blimey, I had to stop for breath twice in that sentence.