Tuesday, February 10, 2015

Land Price Vs. Wages

"All the doom and gloom got me to thinking about what a guy's gonna need to do to get through it. So I got out my handy dandy excel program again. So its obvious that one of the best ways to weather the storm is to increase revenues for your family. That means getting a job, or sending the wife to get one. But will that make much of a difference? Lets look at how many acres that job would have paid for in years past.  A full time job right now pays for only 5 acres per year...while a full time job in the 80's paid for 18 acres a year.  But today's ratio is actually pretty close to the boom of the 70's.

The wages are from this source:

http://www.ssa.gov/OACT/COLA/AWI.html

You local wages may differ, but its changes in the ratio we are looking at, so consistency is all that matters.

The prices were for my LOCAL area, and quite frankly anything before '84 I'm completely guessing.  I wasn't alive then, and my dad isn't alive now, but I'm probably pretty close.  And the years might not be specifically accurate to the rise and fall of prices. during the '70's and '80's but they should catch the general move of the era........quit nitpicking.....I'm taking about 15 minutes to do this and gotta get other work done.



What jumps out to me is how that ratio falls during periods of excess, and rises again during periods of strife.  I'll bet if I actually wanted to dig deep and analyze this ratio more accurately I'd find that for my area the average ratio might be around 12-15.  What does that portend?  If we extrapolate another 10 years out to 2024.  The average wage should be about 62,000.  And we took that 62,000 and divided it by the ratio of 12-15 we might be looking at an average land price about:  $4133-5166  in 2024

Anybody throwing up yet?

Some of the um....more experienced operators...... can shed some light on historical land prices and throw up their ratios to see if the trend matches.  Every local area might have different numbers, but the trends in the ratios will probably be similar.

I'll be back later with some popcorn......

Discuss away............."

Ed
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2 comments:

  1. AnonymousFebruary 10, 2015 at 7:53 AM

    Ed my thoughts are just I don't think a 100 acre farm should be a million dollars as if it holds we will be like Europe/UK with a farm aristocracy & poor tenant farmers.As far as charts go,since we went to no til,RR crops,ect & 200+ corn are they still relevent? The argument on NAT about dock worker wages/ entertainment/sports/farmers tells me someday NA will have to deal with some real inequalities,how we deal with it I don't know. Christian values/charity is talked about but does it really happen? Enjoy your blog,it makes us think-regards-kevin in Ontario

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  2. Ed WinkleFebruary 10, 2015 at 8:42 AM

    I don't think so either Kevin, but you and I don't have any control over that. Each operation is relevant to the one managing it and it does all add up. Each one is so unique and individual, I guess that is what makes it still appealing regardless of size.

    Ed

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