Pasture Pricing ?

[Stocker Steve]

I was at a local watering hole last week when I was asked if I was interested in buying another pasture. I said sure. :cboy:

I ran some rough numbers the next day and once again was puzzled by the limited effect of production on land pricing :
- One county (we live a mile from the county line) raised accessed land values one percent this year, the other dropped them 6%.
- Better land sells for about 33% more than poorer land, but the stocking rate is about 250% more.
- So, if you want to graze cattle you are better off buying the best land (which was probably row cropped in the past) and putting it into grass.

It seems like I am in the minority camp on this train of thought. Is land ever valued by its pasture production potential?

 

[True Grit Farms]

I would think the price of land is dependent upon what the market will bare. I've had some land for sale for over 10 years now, and when someone wants it bad enough it will sell.

 

[Stocker Steve]

I would think the price of land is dependent upon what the market will bare. I've had some land for sale for over 10 years now, and when someone wants it bad enough it will sell.

If it was because of economic opportunity - - it would have sold in less than 10 years. So, your pricing must be based on emotion ?

 

[True Grit Farms]

Economic opportunity.

 

[Aaron]

I'd have 1/2 a dozen sharp pencils on hand if you start buying pasture and calves hit $500 this fall, at the speed the market is dropping.

 

[True Grit Farms]

The reason it hasn't sold is capital gain taxes aren't fair. It makes no sense to give the thieves and crooks 25%. Every business transaction needs to have the tax benefits or losses figured into the deal.

 

[Brute 23]

Land sells based on market value. Market value is based on what some one is willing to pay. What some one is willing to pay varies greatly from person to person.

The reason it hasn't sold is capital gain taxes aren't fair. It makes no sense to give the thieves and crooks 25%. Every business transaction needs to have the tax benefits or losses figured into the deal.

Capital gains not fair? I'd love to push all my income in to capital gains.

 

[SJB]

Market value is only half based on what somebody is willing to pay.

 

[Stocker Steve]

I'd have 1/2 a dozen sharp pencils on hand if you start buying pasture and calves hit $500 this fall, at the speed the market is dropping.

Yes, there are some folks panicking right now.
I like to factor in the possibility of things going well, :banana:
before I try to catch the falling knife. ;-)

 

[Stocker Steve]

Land sells based on market value. Market value is based on what some one is willing to pay.

Market value might be zero here, because nothing is selling.

 

[Brute 23]

Market value is only half based on what somebody is willing to pay.

.... and what some one is willing to accept.

 

[hillbillyhammer]

Market value is only half based on what somebody is willing to pay.

.... and what some one is willing to accept.

that may be the most important part

 

[Son of Butch]

I would think the price of land is dependent upon what the market will bare. I've had some land for sale for over 10 years now, and when someone wants it bad enough it will sell.

or at the estate auction.

 

[True Grit Farms]

I would think the price of land is dependent upon what the market will bare. I've had some land for sale for over 10 years now, and when someone wants it bad enough it will sell.

or at the estate auction.

That's been the plan unless someone wants it bad enough.

 

[TexasBred]

I was at a local watering hole last week when I was asked if I was interested in buying another pasture. I said sure. :cboy:

I ran some rough numbers the next day and once again was puzzled by the limited effect of production on land pricing :
- One county (we live a mile from the county line) raised accessed land values one percent this year, the other dropped them 6%.
- Better land sells for about 33% more than poorer land, but the stocking rate is about 250% more.
- So, if you want to graze cattle you are better off buying the best land (which was probably row cropped in the past) and putting it into grass.

It seems like I am in the minority camp on this train of thought. Is land ever valued by its pasture production potential?

Seldom if ever.......most everything is priced according to comparables sales in similar properties in the same market in a recent time period. The only cheap land around is usually being sold by an uninformed seller.

 

[Dueyb]

Land may decline in value but it does not depreciate....it's useful life under decent management is forever. This is the main reason the cash return is low. Yes, a person has to pay for it somehow so it should generally be valued corresponding to commodity price trends. Although the general value trend may be down for the next few years, several factors are at play which will likely hold values at fairly strong levels or at least keep them from crashing. Interest rates are back to almost record lows, guys still need grass for their cows (we have lost a lot of pasture to hunting/crop land), very limited supply for sale, and investors/hunters/boomers still are a large % of buyers in my area and most of them have other land to leverage, good off farm jobs, and/or 401k/inheritance money.

 

[Stocker Steve]

We have seem some hunting land coming back onto the market here. High taxes, no appreciation or slight deflation in recent years, and generational transfers all feed into this. A lot of this hunting land was wooded or brushy pasture before the cows got kicked out.
We also see some land going into CRP. In a few cases the owner sold his cows, got a job in town, and put the plow acres into CRP...