With good ag land going for more than $4,500 in some spots, it's worth asking
just how much the average farmer can afford to pay for a piece of ground and
still expect it to cash flow.
Roy Ferguson has been watching the purse strings of farmers for decades,
offering thoughts and advice in his newsletter The Ferguson Ag Report. He
believes $4,500-per-acre grain land will likely never cash flow. And he says
today's push to acquire land could be harmful to some producers—especially those
who have to borrow to do it.
"Some people think I'm against buying land at these prices, no matter what. But
what I'm really doing is cautioning against putting yourself in an economic bind
to purchase land irrespective of what the price is," he says.
In today's land market, Ferguson says grain prices are the key to how well
values will hold. He doesn't share the opinion of many that there are five more
years of increasing land values and strong grain prices ahead. He points out
there has never been a five-year period in U.S. history when grain prices could
support the purchase of $4,500- to $7,500-an-acre land, leveraged with 65 to 75%
debt.
For those who can afford to pay cash in today's land market, Ferguson says he's
concerned about putting such a big dent in liquidity or working capital.
One option he offers is the old principle of trading 2 acres of rented land for
1 acre of purchased land.
"Let's say the 100 acres next to me goes on the market and I've wanted it for 20
years. Now it's available and they want $5,500 an acre. I want it;
I'll buy it.
If I can rent 1.7 to 2 acres for every acre purchased, I could possibly make it
work."
He adds that few producers are willing to do this today, though, because they
can't get enough return on rented land if the rental fee exceeds 30% of the
total revenue generated by that acre of ground.
Rebate checks on the way
Everybody appreciates a little windfall. So in a move aimed at spurring the
economy, Congress has asked the U.S. Treasury to send you one. Checks are
expected to go out next month.
According to the Treasury Department's fact sheet, a married couple with two
children could see between $1,200 to $1,800. A head of household with two
children could see from $450 to $1,200. Married couples with no children could
see between $600 and $1,200. Singles with no children could see from $300 to
$600.
The amount varies based on incomes and federal taxes paid. For more specifics on
what you can expect, go to www.treas.gov and search for "tax rebates."
Auto insurance premiums dropping for some
When the price tag on almost everything seems to be going up, it's nice to hear
that some things are decreasing in cost. Believe it or not, auto insurance is
one of them.
Many major auto insurers are now changing how they set premiums. As a result,
some policyholders are seeing a reduction when their renewal notice comes.
Now instead of just looking at age, driving record, gender and a few other
variables, many major insurers are looking at more factors when setting
rates—including credit history.
Here's yet another reason to check your credit history regularly and pay those
bills on time. People with the best records saw rates drop by as much as 25% in
some cases.
So the next time your auto policy is up for renewal, shop around and look for
the best deal. You can even check your insurance score at www.truecredit.com for
$9.95.