American Society of Farm Managers and Rural Appraisers

Farmers Are Now Being Offered $1,000 Per Acre or More to Lease Their Land For Solar

Wed, 08 May 2024 19:57:37 GMT

The push to add solar energy is gaining traction across the U.S., and it’s coming with sticker shock on just how much solar companies are willing to pay farmers to lease their ground. A survey of farmers shows the majority of farmers are being offered more than $1,000 per acre by companies for solar leasing, and that could also drive up the price of cash rental rates.

The Biden administration has a goal of a net-zero electric grid by 2035, with solar and battery-powered energy as three vehicles to get there. As the administration works to accelerate their “clean energy” plan across the U.S., land is in high demand, especially for future solar projects.

Michael Langemeier, an agricultural economist with Purdue University, says the Ag Economy Barometer is revealing the sticker shock of solar leasing rates. The survey of 400 agricultural producers, is now asking farmers how many had actively engaged in discussions with any companies about leasing farmland you own for solar installation, and the response was surprising.

“It was 19% who said they have engaged in discussions, and so think about that, that’s a huge percentage of the survey respondents have actually engaged in someone about leases. That doesn’t mean they’ve signed a thing, but that means that they’ve actually been approached,” says Langemeier.

(Farm Journal)

The April survey showed a noticeable uptick in the percentage of farmers who reported having a discussion with a company about it in the last 6 months. In April, 19% of farmers said they’ve had discussions, up from 12% in March.

The bigger surprise may be in the high rates solar companies are offering farmers.

58% say the rates were over $1,000 per acre
30% say the rates they were offered ranged from $,1000 to $1,250 per acre
28% say rates were more than $1,200 per acre.

With expanding renewable energy installations such as wind and solar, The Top Producer Podcast host Paul Neiffer asked David Muth of Peoples Company Capital Markets , the Investment platform for Peoples Company, how those land uses change long term land values.

“This is for the entire U.S.,” he adds. “That’s a high rate even for the eastern Corn Belt where our cash rates are much higher, but think about what even a $750 rate would mean in the Great Plains where the cash rents are much, much lower. And so what you’re having here is these solar lease rates that are multiples of the current cash rent rates.”

(Farm Journal)

Langemeier says as farmers and land owners are offered high leasing rates for solar, he thinks the push for solar will then spill over to other cash rents.

“That’s going to put upward pressure on cash rents, and it’s probably going to put upward pressure on land values, given that it’s local,” he says. “And so it probably impacts a fairly local area, depending on whether your area has solar leasing or not, but it certainly has pretty wide ramifications on what’s going on in agriculture.”

How Do Wind, Solar, Renewable Energy Effect Land Values?

With a price tag of more than $1,000 per acre, t’s enticing for farmers who are staring at crop prices below their cost of production. The April Ag Economists Monthly Monitor survey released this week showed farmer sentiments are dropping. The survey, which is conducted by Purdue University and the CME group, fell 15 points from March to 99.

Purdue says it was the weakest farmer sentiment reading since June of 2022 and the lowest current condition rating since May of 2020 as both the current condition index and the future expectations index saw a drop.

“People became less optimistic about what was taking place on their farms today, and they’re also starting to show some evidence of being some concerns about where we’re headed here over the course of the next year,” says Jim Mintert, director of the Center for Commercial Agriculture at Purdue University.

Purdue economists say farmers are concerned about their current financial situation and expectations for weak financial performance in the year ahead were the driving forces behind the fall-off in farmer sentiment. The April Barometer survey was conducted from April 8 through April 12, 2024.

Which Foreign Country Owns the Most Farmland in the U.S.? Hint: It's Not China

Thu, 11 Jan 2024 17:24:37 GMT

Controversy continues to grow across the U.S., and China is the primary target of the new rules. However, China doesn’t own the most farmland in the U.S., according to a new USDA report. It’s actually Canada, which accounts for 32%, or 14.2 million acres.

Rounding out the top five are the Netherlands at 12%, Italy at 6%, the United Kingdom at 6% and Germany at 5%. Together, citizens in those countries hold 13 million acres, or 29%, of the foreign-held acres in the U.S. China owns less than 1%, or 349,442 acres.

(Farm Journal)

All told, 43.4 million acres of forest and farmland in the U.S., or 3.4% of all ag land, is foreign owned as of Dec. 31, 2022. Roughly 30 million of those acres are reported as foreign-owned, with the remainder primarily under a 10-year-or-longer lease. Of the 30 million, 66% is owner-operated, 14% has a tenant or sharecropper as the producer and 12% report a manager other than the owner or a tenant/sharecropper as producer. The remaining 7% are “NA.”

USDA says the two biggest Chinese-owned companies with land holdings in the U.S. are Brazos Highland and Murphy Brown LLC, which owns Smithfield Foods. Brazos Highland reported owning 102,345 acres, and Smithfield owns 97,975 acres.

(Farm Journal)

The top five states with the largest Chinese holdings are:

Texas at 162,167 acres
North Carolina at 44,776 acres
Missouri at 43,071 acres
Utah at 32,447 acres
Virginia at 14,382 acres

USDA reports those five states combined account for 85% of China’s farmland ownership. In Texas, USDA reports China has long-term leases associated with wind energy, and in North Carolina and Missouri, ownership is tied to Smithfield and producers who contract for pork production.

More States to Take Up Possible Bans in 2024

Foreign-held farmland has become a hot button topic on Capitol Hill. Farm Journal Washington correspondent Jim Wiesemeyer thinks it will continue to gain momentum in 2024 as a political ploy used by candidates.

“It’s an emotional issue, and it’s not a simple issue either,” Wiesemeyer says. “I was recently in Missouri, and some commodity leaders worry about the negative consequences of going too far. No one’s saying China should not be watched relative to buying farmland near airports, national security is involved in that case, but more than a few farmers are looking at the potential downsides for pork producers who contract with Smithfield and the number of acres they own.”

One of those unintended consequences is playing out in Arkansas.

“I’m announcing Syngenta, a Chinese state-owned agrichemical company, must give up its landing holdings in Arkansas,” says Gov. Sarah Huckabee Sanders, referencing a 160-acre research site owned by Northrup King Seed, a Syngenta subsidiary.

Eric Boeck, president of Syngenta Seeds North America, told Farm Journal editor Clinton Griffiths: “EPA and USDA many times require us to do work and permitting right in the same state as we’re going to sell products. One of the first things we have to make sure we figure out is how we work with the local community to make sure we’re still getting products tested in their backyard, so we have the ability to sell those products.”

(Farm Journal)

Syngenta argues if they sell that particular farm, Arkansas farmers will be at a disadvantage because research can’t be done in the same weather and soil conditions.

“We’re heavy in the soybean market in Arkansas, some of those maturity zones, we have a very significant market share and savings,” Boeck says. “We want to make sure we’re protecting those farmers’ abilities to be able to use our products.”

Wiesemeyer says the bigger issue for U.S. farmland might be solar panels, with farmers in states like Missouri reporting companies have offered to pay more than $1,000 per acre cash rent to put solar panels on their farm. At such a high price, he says it’s eating up acres of farmland, with the potential to grow even more in 2024.

Inflation and Recession Pressures: Is Farmland a Good Investment Right Now?

Wed, 23 Aug 2023 15:52:30 GMT

The Federal Reserve is hosting its Economy Policy Symposium this week, which has all eyes on Jackson Hole Wyoming for further details on inflation, interest rates and if a recession is looming. But would a recession effect your operation the way you think?

According to Bruce Sherrick, professor at the University of Illinois, you might not need to worry about what inflation is doing to your farmland values.

“Farmland returns are very highly correlated with inflation,” Sherrick says. “Most importantly, it has a positive correlation with inflation.”

Sherrick says this correlation is derived from the size and debt of the industry.

“Put the entire holdings of the country on one balance sheet and it’s now four trillion plus and only 13% leveraged, so 13% debt underneath it,” he says. “An interest rate change doesn’t have as big of a proportional impact as if you were talking about companies traded on the stock exchange, where the average leverage turns out to be around two-thirds.”

While the percentage of debt is low in comparison, he also highlights it’s mostly long-term, fixed-rate debt. Increasing interest rates won’t have as large of an impact on that, but it will decrease transactions.

Outside of inflation, there may be other reasons farmland values remain elevated.

According to the Federal Reserve Bank of Kansas City, a steady supply of land sales and strong demand from farmers has likely supported broad resiliency of real estate values so far in 2023.

Is It a Good Time to Invest in Farmland?

The Kansas City Fed also reported that growth in farmland values has eased from recent years but remains steady. So, despite higher interest rates, farmland remains a wise investment opportunity.

“People sometimes refer to farmland as an investment in gold, plus a coupon,” Sherrick says. “You get a fairly low annual cash flow, fairly high long-term rates of return and tax advantages to the asset classes.”

He outlines how the type of farmland to invest in remains up to the buyer’s background and risk tolerance.

Annual production crops – such as corn, soy and wheat – offer higher stability due to tenants or crop insurance to help manage risk. However, permanent crops – such as tree nuts, wine grapes or citrus – would be expected to have higher total return over time but higher volatility.

“If I were picking both from a financial and an emotional perspective, the next place I could put a dollar, I still would favor farmland pretty highly,” said Sherrick.

As for an outlook into 2024, Sherrick says to expect moderate changes.

“I won’t be surprised if in the next year we have a softening of land values,” Sherrick says. “It won’t surprise me, but I’m not expecting a crash and I don’t see it as being driven entirely by interest rates.”

Hear more on The Top Producer podcast, hosted by Paul Neiffer:

New Farmland Bill Would Create a Public Database for Foreign Land Ownership

Sat, 22 Jul 2023 03:07:00 GMT

Sens. Chuck Grassley (R-Iowa) and Tammy Baldwin (D-Wis.) introduced a new bipartisan bill , the Farmland Security Act of 2023 , seeking to further boost transparency in foreign ownership of U.S. farmland.

The legislation builds upon measures introduced by the same senators in the Farmland Security Act of 2022 and amendments to the 1978 Agricultural Foreign Investment Disclosure Act. This bill would require greater transparency for foreign purchases of U.S. ag land, impose stronger penalties for reporting non-compliance, and mandate USDA to audit a minimum of 10% of foreign ag land ownership reports annually.

The issue of foreign ownership is increasingly important as nearly half of U.S. ag land is owned by individuals aged 65 and over, and approximately 100 million acres are expected to change hands over the next decade due to retirement.

What’s included in the Farmland Security Act of 2023?

The measure necessitates a transition to a digital filing system and a public database on foreign ownership for researching ownership trends. It also requires the USDA to report on foreign investment impacts. The bill further emphasizes transparency, complete and accurate data collection, and greater understanding of foreign ownership.

The new legislation introduces stricter penalties for non-compliant foreign owners or “shell companies” by removing the current fee cap of 25% of land valuation, imposing a 100% land valuation fee for non-reporting shell companies unless corrected within 60 days of notification. It authorizes $2 million annually for administration as amended in the Agricultural Foreign Investment Disclosure Act.

Other stipulations include USDA research into foreign ownership of agricultural production capacity and foreign participation in U.S. ag, along with investigations into the use of “shell companies”. State and county-level staff would also be trained to identify non-reporting foreign-owned farmland.

Owning Farmland Is Now Cool, Even If You Don't Farm

Wed, 01 Feb 2023 22:17:29 GMT

For those in agriculture, owning farmland has long been viewed as a symbol of status and wealth. Now, even individuals who don’t farm are jumping on board, looking to buy farmland. The interest from outside investors has propelled farmland prices higher over the past year, but even with the rapid run-up in prices, experts say we aren’t in the middle of a farmland bubble.

The top two farmland sales in Iowa raked in $21,000 and $20,000 per acre last week. While it’s not a statewide record, the strong interest and bids on farmland are proof farmland prices are in the midst of a bubble, as farmers are still in the majority of winning bidders at auctions today.

Related Story: A New Way to Rent Ground is Gaining Traction - With Cash Rent Bids in Illinois Topping $600 Per Acre

“It is the farmers who can afford to pay the higher prices,” says Jim Rothermich of Iowa Appraisal. “Their hold period is much longer than an investor. A farmer’s hold period could be from 50 to 100 years. So, if they pay too much for a piece of ground over time, it’ll work itself out and in 50 years, people ask, ‘Why didn’t you buy more land at that price?’”

Professional Athletes Are Buying Farmland

Buying farmland is so cool, even professional athletes are now buying land. Earlier this month, Cincinnati Bengals quarterback Joe Burrow, along with Boston Celtics forward Blake Griffin and a few other athletes, pooled together to buy farmland in northeast Iowa. The 104-acre farm was a transaction made through Patricof Co., a private New York investment firm that facilitated the deal.

“Owning land has become popular, it’s trending,” Rothermich says. “If you can go to the coffee shop and say you own land, or even Joe Burrow going to maybe a Super Bowl party and telling all his friends how much land his has, that’s the cool thing to do now.”

Burrow might not be playing in the Super Bowl, but if he does have a watch party, he will be able to tell his friends he owns farmland. Rothermich says the group of athletes purchased the 100 acres in Benton County, Iowa, for just over $10,000 per acre.

“I think they got a good deal, by the way, but they are wanting to get into the land space,” Rothermich says.

It’s not just professional athletes. Entrepreneurs, doctors and lawyers also see it as a symbol of status and wealth, joining their friends who are all in search of owning a piece of prime real estate. And today, that’s farm ground.

Not a Farmland Price Bubble

The strong interest, both in farming and outside of farming, is what’s laying a foundation for continued strength in not only land prices, but also a historic increase in cash rents . Rothermich points out while Iowa is seeing record farmland prices, Illinois is seeing records in the cash rent market.

“Rent auctions provide true open market rental valuation and answer the question: What will the market bear for my ground,” Rothermich says. “Farmers bid based on how much they would pay per acre to farm the ground for the specific lease term.”

“I don’t think this is a bubble because that implies it breaks with a massive deflation,” says Mike Walsten, contributor to Pro Farmer’s LandOwner newsletter. “Yes, there have been quite a few seemingly irrational land auctions and rent auctions at $600 an acre, but there were also quite a few signs of cooling while these headliners occurred.”

Low-Quality Farmland Showing Signs of Weakness

Rothermich points out low-quality farm ground is starting to see some pressure. However, high-quality ground remains the hot commodity, with prices continuing to post gains.

“Yes, values are leveling off,” Walsten says. “The top- and medium-quality ground stills show low single-digit gains. Lower-quality ground is firm where no top-quality ground is available — southern Illinois for instance.”

Walsten says there have been some no sales - and an increasing number of slow sales- that started late fall and now into winter.

“These came where communities are normally much less aggressive on land purchases, the ground was less than top-quality, the percent tillable versus was low, the area has very little livestock, tile, etc. is needed. In a bubble, all this type of ground gets gobbled up,” Walsten says.

Related Stories:

A New Way to Rent Ground is Gaining Traction - With Cash Rent Bids in Illinois Topping $600 Per Acre

5 Eye-Popping Farmland Sales from 5 States

$30,000 Per Acre? Yep, The Details on the Latest Record-Breaking Farmland Sale

Beyond the Buzz: Land Values, Fundamentals and New Services

2023 Cash Rent Outlook: Be Ready for Higher Rates

Rental Rally: Don’t Let High Cash Rents Sink The Farm

Record Breaking Butter Display Unveiled at Ohio State Fair

Tue, 20 Sep 2022 02:43:01 GMT

Go to nearly any state fair in the United States and you’ll probably see a butter sculpture. A must-see crowd favorite attraction - butter creations range from cows to movie stars to presidents.

The 2022 Ohio State Fair in Columbus debuted more than 2,500 lbs. of butter that features 10 life-size sculptures of kids and animals, including the iconic butter cow, a goat and a pig. This is the fair’s largest butter display to date and the first butter displayed in two years.

The butter sculptures are maintained in a 46°F temperature case and more than 600 hours went into creating this year’s creation.

The American Dairy Association Mideast chose five participants showing their animals to reflect on the true meaning and traditions of the fair, which date back to 1850.

“On behalf of Ohio’s dairy farmers, we are proud to sponsor the butter cow display at the Ohio State Fair,” says Jenny Crabtree, senior vice president of communications with American Dairy Association Mideast. “This year we are paying a tribute to the fair’s agricultural heritage. For many, the fair is about the midway and carnival rides, but fairs were initially held for farmers to gather, exhibit livestock and learn from each other, and today that still holds true.”

The Ohio State Fair butter display is expected to attract more than 500,000 fairgoers to the Dairy Products Building, where they can also learn about Ohio’s dairy farmers and enjoy delicious dairy foods including ice cream, milkshakes, cheese sandwiches and milk.

The Ohio State Fair runs through August 7.

At the conclusion of the State Fair, the butter, along with used cooking grease is collected and refined into an ingredient that is used in a variety of non-edible products, like soap and grease for metal forging.

American Society of Farm Managers and Rural Appraisers

Farmers Are Now Being Offered $1,000 Per Acre or More to Lease Their Land For Solar

How Do Wind, Solar, Renewable Energy Effect Land Values?

Which Foreign Country Owns the Most Farmland in the U.S.? Hint: It's Not China

More States to Take Up Possible Bans in 2024

Inflation and Recession Pressures: Is Farmland a Good Investment Right Now?

Is It a Good Time to Invest in Farmland?

New Farmland Bill Would Create a Public Database for Foreign Land Ownership

What’s included in the Farmland Security Act of 2023?

Owning Farmland Is Now Cool, Even If You Don't Farm

Professional Athletes Are Buying Farmland

Not a Farmland Price Bubble

Read More: Who’s Really Behind All These Record Farmland Buys?

Low-Quality Farmland Showing Signs of Weakness

5 Eye-Popping Farmland Sales from 5 States

$30,000 Per Acre? Yep, The Details on the Latest Record-Breaking Farmland Sale

Beyond the Buzz: Land Values, Fundamentals and New Services

Rental Rally: Don’t Let High Cash Rents Sink The Farm

Record Breaking Butter Display Unveiled at Ohio State Fair