The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Maximize Your Farmland Revenue!
Apr 27, 2012
In a meeting with one of my clients in northern Illinois yesterday, we discussed his options for increasing his current land holdings without adding more land. He is in an area where farmland is costing $12,000 or more and none is available. Additionally, land rents are approaching or exceeding $400 per acre.
One option is to put an irrigation pivot on a 240-acre-plus parcel. Although this land is already yielding at least 200 bu. on average, putting in the irrigation system would cost about $200,000. The return would be increasing the yield to around 300 bu. per acre. If the normal variable costs are around $400 per acre, the additional $200,000 investment would yield about $60,000 to $80,000 per year, or a less than three-year payback.
This probably beats paying $200,000 for 16 acres of land.
In your operation, are you doing everything to maximize your current land production before going after other, possibly more costly, options?