A number of factors have come together to provide unique circumstances that may be beneficial to both buyers and sellers of agricultural land, says Curtis Talley, Jr., Michigan State University extension farm management educator.
• Strong demand for land.
• Interest rates at almost all-time lows.
• Long-term federal capital gains tax rates not seen since 1933.
Institutional investors (pension funds, private equity groups) see farmland as a diversification to their portfolio, an inflation hedge, a safe haven and a source of stable returns, says Talley. Institutional investors seek long-term stable returns of 6 to 8 percent and that can be done with agricultural land. Since 1970, farmland averaged returns of 12 percent annually, better than the S&P 500. The only investment that has shown less volatility than farmland long-term returns has been U.S. Treasuries.
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