Agricultural Land

The World Needs More McArthurs

Mon, 06 Apr 2026 19:26:55 GMT

There’s a new song in country music that’s striking a chord with American farm families.

“McArthur,” sung by Hardy, Eric Church, Morgan Wallen and Tim McGraw, tells the story of a farm passed through four generations of the same family. Each verse introduces a new McArthur, carrying the land forward in his own time, shaped by different circumstances but tied to the same piece of ground.

That’s the same story many farmers are living today. And if you haven’t heard it yet, take a listen.

John McArthur

The song begins with John McArthur, a man working the land with a mule and a plow to provide for his family. As the first generation, John spends his days laying the foundation of the farm. He doesn’t know what the future holds for the operation, but he knows the work is worth it.

Every farm has this first generation: the person who gave the farm its start. Our grandparents or great-grandparents built the farm out of necessity without knowing what was ahead.

They planted the first crops, cleared the first fields and figured things out as they went. The decisions they made might not have seemed big at the time, but they laid the groundwork for the generations that followed. Even without a map, they knew the farm was something worth building and passing on.

Junior McArthur

Next comes Junior McArthur, the son who steps up to take over the farm but is sent off to war and never returns home.

He represents the second generation: the ones who take over a farm that’s already established but face challenges much different from what their parents experienced. Where John built the foundation, Junior inherits it and has to figure out how to keep it going.

Jones McArthur

After Junior comes Jones McArthur, the third generation to farm the same ground. By the time it’s his turn, the farm is running smoother, but the problems he’s dealing with aren’t the same ones his dad faced. He represents the generation trying to respect what was built while figuring out how to make it work in a more modern world.

In the song, Jones is also the one trying to pass along the lessons he learned growing up on the farm. He understands the value of the land and the work that went into building it, and he tries to teach his son the same thing.

But his son comes home from college seeing something different. Where Jones sees a family history, his son sees the dollar signs tied to the land.

Hunter McArthur

Finally, the song introduces Hunter McArthur. He’s the fourth generation, the one now standing in front of the decision many farms eventually face.

In the lyrics, Hunter is presented with a deal that would turn the farm into a neighborhood. It’s a tempting offer. After generations of hard work, the land is suddenly worth a lot of money.

Hunter represents the generation many farms are looking to today. The farm is established and the land has significant value, but the question becomes what to do with it next.

For many young farmers, this generation faces a different set of decisions from the ones before them. They have more opportunities off the farm and often more outside pressure pulling them in different directions. At the same time, they’re inheriting or buying into farms that have decades of work behind them.

A Familiar Tune

At the end of each generation’s part in the song, a line is sung: “When you pass on, what are you going to pass down?”

Farming has always been about passing things along. Each generation takes what the last one started and tries to make it better, but that chain only works if someone is willing to take the next link.

Today, the pressures on the next generation are real. Land values keep climbing, development keeps pushing farther into the countryside, and, for some families, the offer to sell the farm is hard to pass up. But most farms exist because someone in the previous generation chose to keep it going. They made improvements and worked through challenges with the idea that the farm would be there for the next generation to build on.

The world could use more farmers like the McArthurs. So, when it’s time to think about the next generation, ask yourself this: When you pass on, what are you going to pass down?

For more on succession planing, read:

44 Million Acres: The New Frontier of Farm Consolidation and Growth

Tue, 10 Feb 2026 18:01:18 GMT

At the 2026 Top Producer Summit , Farm Journal Intelligence unveiled new farmland insights derived from predictive modeling and deep-data analysis. The research focused on the shifting landscape of land acquisition, identifying which operations are at risk of consolidation, who is positioned for growth and where the most significant opportunities lie.

Here are the six primary findings for farm businesses:

1. Scale Does Not Immune Operations from Consolidation.

(Farm Journal)

While smaller operations face the highest risk — with 58% of small farms “at risk” for sale or acquisition before 2030 — size is not a complete safeguard. Research shows the risk of consolidation or ownership transfer never drops below 27%, even for the largest operations. Furthermore, crop diversity made minimal impact on these odds; the likelihood of transition remains constant whether a farm produces one crop or more than 11.

2. Geography Trumps Diversification.

(Farm Journal)

Regional location is increasingly becoming a primary driver of financial success, often outweighing the benefits of operational diversification. As regional market divides grow, farmers and ranchers are finding that local market conditions and individual circumstances dictate their trajectory more. State-level or even county-level effects are more indicative of their situation than national trends.

3. The 44-Million-Acre Transition.

(Farm Journal)

Nearly 15% of American cropland is projected to change hands within the next three years, driven by generational transfers, continued consolidation and economic pressures. Farm Journal data identifies the Midwest as the epicenter of this shift, with roughly 12 million acres likely to transition. Nationwide, that total reaches a staggering 44 million acres.

4. Mapping the “Sweet Spot” for Expansion.

(Farm Journal)

By plotting cost per cropland acre against the volume of land likely to transition, clear opportunities for expansion emerge. For producers looking to grow their footprint, the most viable opportunities are currently concentrated in Kansas, Texas, North Dakota, Missouri, and Oklahoma, according to this research.

5. Integrity Is the Top Currency in Rental Markets.

(Farm Journal)

When more than 400 landowners were surveyed about tenant selection, integrity ranked as the most critical factor. Interestingly, age was reported as the least important factor. For producers looking to secure rented ground, a reputation for character and experience outweighs both seniority and youth.

6. The “Willingness” Factor in Technology.

(Farm Journal)

Producers most inclined to expand share a common trait: a higher comfort level and rate of adoption with technology. Crucially, this is not necessarily tied to technical skill or existing expertise, but rather to mindset and action. The most growth-oriented producers are defined by their willingness to try new technologies rather than their current mastery of them.

Download the Full Report

Record-Breaking Sale: Iowa Farmland Sets New High for State at $32,000 Per Acre

Tue, 02 Dec 2025 17:18:23 GMT

An Iowa farmland auction in Sioux County, just outside Orange City, is resetting the top of the market. A 35.5-acre tract sold on Dec. 1 for $32,000 per acre, and Jim Rothermich of Iowa Appraisal says it’s the highest auction price he has recorded in the state.

“It is a 35-and-a-half-acre tract that goes for $32,000 an acre,” Rothermich says. “As far as my data goes, I keep track of all the land auctions in Iowa, that’s the highest. It set a new record yesterday in Iowa.”

He says the previous record was $30,000 per acre, also in Sioux County, set in November 2022, and he’s quick to point out that while Sioux County regularly posts some of Iowa’s biggest numbers, this one still stands apart.

“ The last record is $30,000 an acre , and that is in Sioux County also back in Nov. 11, 2022,” Rothermich says. “So it’s not unusual to see those huge prices in Sioux County. It’s a heavy livestock and dairy county. They need those acres to apply animal waste, and they need the corn production to feed those animals. So it’s not unusual to see that, but that is definitely a high price — no doubt about it.”

A Farmer Bought the Land, Not an Investor

At a time when producers are watching margins and questioning who is really driving top-end land prices, Rothermich says this record isn’t attributed to a Wall Street fund or an out-of-state investor. According to the auctioneer, the winning bidder is a farmer, and the land is positioned to fit directly into an existing local operation.

“According to the auctioneer, it is a farmer buyer,” Rothermich says. “And the highest and best use of this farm is to raise corn and soybeans. I understand it is an adjoining landowner, and there again, it’s a heavy livestock area and dairy area. There’s some large dairies just right around there, and they’re going to use that land.”

No Comment......SOLD! SOLD! SOLD! $1.13+ million or $32,000/acre; purchased by local farmer to produce corn/soybeans. pic.twitter.com/hMeCFJjvjx
— Jim Rothermich, MAI, ARA, ALC (@theLandTalker) December 1, 2025

That adjoining landowner angle matters in competitive auctions, where neighbor value — operational fit, access and scale — can turn into aggressive bidding when a tract comes up for sale.

According to a local source, that dynamic played out in this sale and helped drive the final price higher. The source told Farm Journal the winning bidder operates a large Holstein dairy heifer replacement business, and the tract for sale was located near their existing operation. But competition for the land, and the reason the price went so high, is there was a bidding war with another farmer whose property borders the 35.5-acre parcel, pushing the price well above expectations.

Investor Pressure is Still Real, Amplifying the Top End of Farmland Prices

Rothermich says he can’t say for certain whether investor bids help push the Dec. 1 price to a record. But across Iowa, he says auctioneers describe a consistent trend: Investors, often with local ties, are showing up and competing hard, sometimes forcing farmers to dig deeper for high-quality acres.

“I don’t know if that is the case [in this auction],” he says. “But just visiting with different auctioneers across the state, they’re telling me these investors with local ties, they’re in the market, and they’re pushing these farmers to buy land. Some of those investors are getting them bought, but those local farmers on high-quality land are competing with those guys, and it’s making a difference on high quality.”

In other words, even when a farmer has the winning bid, the bidding atmosphere can still be shaped by investor presence particularly on ground that fits the region’s strongest operations.

Not many $30,000+ sales, but Plenty of Big Numbers in Iowa and Surrounding States

Rothermich says he doesn’t see other Iowa auction results above $30,000 per acre so far this year, but he does track multiple sales above $20,000, including county records.

“I haven’t seen anything over $30,000 this year,” he says. “Now we have several over $20,000 an acre. As a matter of fact, in Mitchell County on Sept. 10 of this year, there is a short 80-acre tract that brings $24,400 an acre, and that is a new price record for that county.”

And Iowa isn’t alone. Rothermich says he’s collecting late-year auction results around the region that show strength continuing across multiple Corn Belt states.

“It’s not just Iowa; we’re seeing these strong prices,” he says. “South Dakota has one farm sell for $18,200 an acre. One in Illinois is $20,150 an acre; I’ve seen several over $20,000 in Illinois. Missouri: $20,000 an acre. Minnesota: a couple tracts bring $17,000 an acre. So it’s not just an Iowa thing; it’s around the surrounding states of Iowa.”

Tight Margins, Strong Land Values Comes as a Surprise

Even with improved commodity prices compared to last year, many producers still describe the current environment as belt-tightening territory: Inputs remain high, and margins are pressured.

That’s why Rothermich says the late-year auction strength, especially the steady stream of standout sales, is catching his attention.

“It does surprise me,” he says. “I am very surprised at the volume. November is typically our busiest month for land auctions, and I’ve been surprised every week in the month of November — some of the strong prices coming out.”

Key Divergence Between High Quality and Lower Quality Farmland

Rothermich says there’s no clearer evidence of a two-speed land market than what’s happening on the lower-quality end, where more auctions are failing to meet seller expectations.

He says he tallies 10 no-sales in Iowa in November, which he calls a high number for the month that typically dominates the auction calendar.

“One area where we are seeing some weakness is the lower quality farms,” he says. “Those are being affected; there’s no doubt about that. And as I say, I keep track of all the land auctions in Iowa; there are 10 no-sales in November. That’s a high number for no sales in a month. So there’s no doubt lower quality farms are being affected.”

When asked directly whether the Dec. 1 record sale signals a widening gap between premium and marginal ground, Rothermich says absolutely.

“The people that have the money to buy that high-quality ground, they’re going after it. There’s no doubt about it,” he adds.

And when it comes to why lower quality farms are more likely to stall at auction, he says the buyer pool changes, especially the presence (or absence) of investors.

“They’re on those lower quality farms,” he says. “You don’t have those local investors competing with the local farmers on that. So those local farmers are kind of driving that market on that, and they’re definitely pulling back. There’s no doubt about it.”

He ties that pullback directly to economic pressure with the weaker performance in some land values a sign of current economic stress.

What to Watch Over the Next Six Months

Rothermich describes today’s auction environment as a market with two tails: a premium segment with strong competition and a lower-quality segment facing resistance. That split makes the overall market feel uneven, even when the headlines are bullish.

“It’s kind of got two tails right now,” he says. “The high quality is selling very good, and the low quality is being affected by the current economy. So it’s kind of a choppy market. That’s how I’d describe it right now.”

Still, he says two fundamentals support stability over the next six months: lower auction volume, which tends to firm prices, and grain prices higher than last year.

“Looking at the number of auctions for November, December, we’re going to be down for the year,” he says. “And that’s been a three-year trend. Lower auction volume is supportive to prices. So as I look at current grain prices, we’re higher than we were last year. So with those two fundamentals, it’s signaling we’re probably going to have a stable market the next six months.”

He adds that good yields, though not necessarily record yield, also help underpin buyer confidence in the near term.

“The lower volume of sales, good harvest … yields are good but not as good as last year,” he says. “Grain prices are higher than they were last year, and we still have buyers out there wanting to get their hands on some high-quality farm ground.”

The $32,000-per-acre Sioux County auction isn’t just a number; it’s a marker of how aggressively buyers are pursuing top-end Iowa farmland, particularly in regions where acres fit into livestock- and dairy-driven demand. The fact Rothermich says the buyer is a farmer adjoining the tract reinforces that operational value is still a powerful force.

At the same time, the record sale lands in a market that’s increasingly divided: Premium farms draw competition while lower-quality farms see more no-sales, signaling that economic pressure is shaping buyer behavior — just not evenly across all acres.

Land Values ‘Remarkably Stable’ Across the Country

Thu, 17 Jul 2025 21:10:07 GMT

Halfway through 2025, land values remain stable across the country despite reverberating uncertainty in the agricultural outlook. And while zooming out to a national level values appear stable, there are some geographic areas showing decline in values.

“The USDA forecasts 2025 net farm income to be the lowest since 2020. This will likely influence producer purchasing power and investor returns, especially as input costs, commodity prices, and interest rates fluctuate,” says Paul Schadegg, senior vice president of real estate for Farmers National Company. “While balance sheets generally remain strong, any negative movements in the ag economy could quickly impact the land market.”

Ty Kreitman of the Kansas City Federal Reserve District reports that from its survey of ag lenders across its district, the average value of non-irrigated farmland declined about 2% from a year ago in the first quarter of 2025. Click here for more from Kreitman.

Commenting on demand, a majority of farmland buyers are farmers, and as such, Schadegg says farmer profitability will be the driver of future farmland value trends.

Regarding supply, the overall market has listings down 25% from the peak inventories in 2020-2021. FNC marketed more than $450 in land in the first six months of 2025. And Schadegg notes an observation that many farm landowners are choosing the stability of the investment in the land’s appreciation rather than selling the property.

The Federal Reserve Bank of Chicago reports the amount of farmland listed for sale was down during the winter and early spring of 2025 compared to 2024. For more takeaways from the Chicago Fed’s survey, click here.

Looking ahead, the survey from the Dallas Federal Reserve Bank also reflects stability as lenders across that district expect farmland values to continue to be stable. Its survey includes takeaways from the second quarter, which you can find here.

Regional Updates

With its mid-year annual report, FNC managers highlight the trends of their regions.

Kansas, Eastern Colorado and Western Missouri

“High-quality farmland values from Colorado through Kansas to Missouri remain steady despite regional differences in rainfall and soil types,” says Steve Morgan, area sales manager with FNC. “Since July 2024, some tracts have sold for more than 5% above market in competitive auctions, while others have dipped slightly below last year’s prices.”

Average prices per acre:

$5,800 in Kansas
$7,500 in Missouri
$3,500 in Oklahoma

Indiana, Ohio, Michigan, Kentucky

“Farms that enter the market with a high percentage of tillable acres, highly productive soil types and in areas with large farm operators will still sell for values within 90% to 95% of the range seen from 2021 to 2023. Farms with fewer tillable acres and lower-quality soils will be priced 10% to 20% below the market highs of a few years ago,” says Jay Van Gorden, area sales manager for FNC.

He says the territory has up to 30% fewer sales than the previous three-year trend, but Van Gorden says that could change to pay down debt, generate operating capital or farmer retirement.

Illinois and Wisconsin

“After a clear softening in late 2024 and early 2025, the Illinois and Wisconsin farmland markets are showing signs of stabilization, especially in regions with high soil productivity and local operator demand,” says Jim Ferguson, relationship executive at FNC. “Despite short-term caution, both sellers and buyers seem more confident than they were in late 2024 or early Q1 2025.”

Ferguson says a characteristic of today’s market is buyers and sellers are enter negotiations with “more balanced expectations.”

“This isn’t a return to the peak-level bidding wars of recent years, but it’s also not a market in retreat. Well-marketed properties with strong soils, good drainage and favorable locations are still attracting strong interest,” he says.

Dakotas and Western Minnesota

“Many expected a correction in 2024 or 2025, but the upper Midwest continues to defy that trend,” says Troy Swee, area sales manager at FNC. He cites:

a 5.7% increase in land values in South Dakota during the second half of 2024, according to Farm Credit Services.
a 1.6% rise in Minnesota for the same period, also according to Farm Credit Services.
a 10.55% increase in eastern North Dakota after two straight years of decline, according to North Dakota State University.

“Tighter balance sheets are also decreasing the number of qualified bidders at land auctions,” he says. “Still, the outlook remains steady. With harvest months away, early signs indicate another strong crop across much of the region. If that holds true, land values and cash rents are likely to stay stable through the end of the year.”

Western Nebraska, Northwest Kansas and Northeastern Colorado

Higher interest rates and lower commodity prices are not putting farmers in this region in a position to expand, says Cole Nickerson, area sales manager at FNC.

“These financial pressures have narrowed margins for many producers, resulting in more cautious land investment behavior,” he says. “As a result, we are seeing a decline in public land listings throughout the territory. Additionally, there has been a slight shift from public auction to traditional listings as sellers aim to protect their investment value.”

Nickerson says a bright spot in the geography’s land market is pasture and hay acres.

“All-time highs in feeder cattle prices, along with elevated cash rental rates, have supported strong demand for grazing land. Hardland pastures with quality fences and excellent access are attracting the most interest from buyers. Although higher cattle prices have brought positivity to the local land market, it hasn’t been enough to offset the broader decline in average land value across the region,” he says.

Recently released data from the University of Nebraska shows for the first time in six years, the state’s land values went backward. Overall, average land values declined 2% to $3,935 an acre.

Eastern Nebraska and Western Iowa

When reflecting on land value trends, Chanda Scheuring, area sales manager at FNC, says the biggest question is how long can the current levels be maintained.

“As the agricultural economy has less readily available cash than in previous years, some farmers are or already have started to feel pressure from their financial lenders,” Scheuring says. “Discussions about tightening budgets and even selling a quarter of their land have been topics some local loan officers have suggested to a few of their clients.”

The buyer pool is shrinking in number of producers who have the ability to expand in the current ag economy.

Texas

With cautious optimism, Sawyer Breeding, real estate sales and ranch manager at FNC, says the fast build up in values during the COVID pandemic has tempered to more normal.

“Prices remain relatively steady, with a moderate year-over-year growth of 1.32% in 2025 for rural real estate in Texas,” Breeding says. “Properties are selling at a moderate pace, with some listings staying on the market longer than in previous years. Buyers are becoming more focused on higher-quality properties. Both buyers and sellers should approach the market with a focus on long-term value, considering factors such as land improvements, water rights and access to utilities, all of which can significantly affect a property’s desirability and worth.”

Iowa and Southern Minnesota

Supply drives the market in Iowa, says Thomas Schutter, area sales manager at FNC.

“As prices softened last year, many potential sellers chose to hold off, leading to tighter supply and a new market dynamic. With land supply down, we saw a slight uptick in prices by the end of Q1 2025. Several auctions across the state reached levels comparable to the highs of 2022 and 2023,” he says.

He says lower grain prices and strained working capital brought a resurgence of farmer leasebacks and off-market opportunities for investors in farmland.

USDA Takes 'Bold Action' to Crack Down on Foreign-Owned Farmland, Targets China

Tue, 08 Jul 2025 19:04:07 GMT

The Trump administration is focusing on national security in agriculture, which includes action to help eliminate foreign-owned farmland. USDA unveiled the National Farm Security Action Plan this week, a strategy that is aimed at protecting and securing American farmland from foreign influence, as well as defending innovation.

The plan is the next pillar of Agriculture Secretary Brooke Rollins’ Make Agriculture Great Again initiative. USDA calls it a “historic plan” that “elevates American agriculture as a key element of our nation’s national security, addressing urgent threats from foreign adversaries and strengthening the resilience of our nation’s food and agricultural systems.”

The Trump administration has been facing increased pressure to crack down on the amount of foreign-owned farmland in the U.S., especially surrounding U.S. military bases.

“We feed the world. We lead the world. And we’ll never let foreign adversaries control our land, our labs, or our livelihoods,” said Rollins. “This Action Plan puts America’s farmers, families, and future first — exactly where they belong. Under President Trump’s leadership, American agriculture will be strong, secure, and resilient. He will never stop fighting for our farmers and our ranchers.

“Too much American land is owned by nationals of adversarial countries, and more than 265,000 acres in the United States are owned by Chinese nationals, much of which is located near critical U.S. military bases ,” Rollins also told reporters Monday.

USDA's National Farm Security Action Plan, announced today under @SecRollins' Make Agriculture Great Again initiative, safeguards our food supply, strengthens infrastructure, & defends U.S. ag innovation from foreign adversaries.

🔗https://t.co/8wl5YfIzju pic.twitter.com/cqRv4PU6Th
— Dept. of Agriculture (@USDA) July 8, 2025

In what USDA calls “aggressive action,” the agency says it is addressing seven critical areas, which include:

Secure and protect American farmland — Address U.S. foreign farmland ownership from adversaries head on. Total transparency. Tougher penalties.
Enhance agricultural supply chain resilience — Refocus domestic investment into key manufacturing sectors and identify non-adversarial partners to work with when domestic production is not available. Plan for contingencies.
Protect U.S. nutrition safety net from fraud and foreign exploitation — Billions have been stolen by foreign crime rings. That ends now.
Defend agricultural research and innovation — No more sweetheart deals or secret pacts with hostile nations. American ideas stay in America.
Put America first in every USDA program — From farm loans to food safety, every program will reflect the America First agenda.
Safeguard plant and animal health — Crack down on bio-threats before they ever reach American soil.
Protect critical infrastructure — Farms, food and supply chains are national security assets — and will be treated as such.

Rollins wasn’t alone in unveiling the new plan. Along with Secretary of Defense Pete Hegseth, Attorney General Pam Bondi and Secretary of Homeland Security Kristi Noem and several state governors, Rollins says the Trump administration is creating a united front to address foreign threats.

FARM SECURITY IS NATIONAL SECURITY: Today, the Trump Administration launched the National Farm Security Action plan to protect our farmland and food supply from foreign threats. 🧵 pic.twitter.com/hUwxknmGYK
— Rapid Response 47 (@RapidResponse47) July 8, 2025

“Getting an understanding of why foreign entities, companies and individuals buy up land around those bases. That’s something I should be paying attention to,” said Defense Secretary Pete Hegseth during the press conference this week.

Agriculture Secretary Brooke Rollins conducts a news conference to announce the National Farm Security Action Plan and “discuss actions being taken to protect American agriculture from foreign threats,” outside the USDA Whitten Building on Tuesday, July 8, 2025. Attorney General Pam Bondi, left, Defense Secretary Pete Hegseth, and Homeland Security Secretary Kristi Noem, also appear.

((Tom Williams/CQ Roll Call/Sipa USA))

USDA says it’s launching a new online portal for farmers, ranchers, and others to report possible false or failed reporting and compliance with respect to Agricultural Foreign Investment Disclosure Act of 1978 (AFIDA).

“Further, the portal will receive and review claims of adversarial foreign influence on federal, state, and local policymakers with respect to purchases of U.S. farmland and business dealings in other facets of U.S. agricultural supply chains. Submissions may be accepted anonymously or contact information may be provided for appropriate follow up by USDA.”

As background, USDA explained AFIDA requires foreign investors who acquire, transfer, or hold an interest in U.S. agricultural land to report such holdings and transactions to the Secretary of Agriculture. USDA says In January 2024, the Government Accountability Office published a report on foreign investments in U.S. agricultural land, which provided recommendations for enhancing efforts to collect, track, and share key information to identify national security risks.

Increasing Biosecurity Threats

Rollins specifically mentioned increasing biosecurity threats from China.

As AgWeb reported in June , another Chinese national is accused of smuggling biological materials related to roundworms into the U.S. for work at a University of Michigan laboratory. According to the U.S. attorney’s office, Chengxuan Han is charged with smuggling goods into the U.S. and making false statements.

That followed two Chinese nationals charged with trying to smuggle a fungus , Fusarium graminearum, into the U.S. just a week prior.

USDA says those recent events highlight the critical need for this action.

“Last month, the U.S. Department of Justice charged foreign nationals, including a Chinese Communist Party member, with smuggling a noxious fungus into the United States — a potential agroterrorism weapon responsible for billions in global crop losses. The scheme involved a U.S. research lab and highlighted a disturbing trend: America’s enemies are playing the long game — infiltrating our research, buying up our farmland, stealing our technology, and launching cyberattacks on our food systems. These actions expose strategic vulnerabilities in America’s food and agriculture supply chain,” USDA said in a release.

Foreign-Owned Farmland By the Numbers

The foreign-owned farmland piece drew this biggest coverage out of USDA’s announcement this week . As AgWeb reported last year , when you look at the numbers, China doesn’t own the most farmland in the U.S.. According to a USDA report, it’s actually Canada, which accounts for 32%, or 14.2 million acres. But as USDA said on Tuesday, the concern is the amount of farmland owned by China is growing.

Foreign-Owned Land by County

(USDA)

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.

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.

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.

Unintended Consequences?

Foreign-held farmland has become a hot-button topic on Capitol Hill, but some warn unintended consequences could impact agriculture, especially for those industries who have companies that are Chinese owned. Just take Smithfield as an example. If Smithfield is targeted, some fear that could create more consolidation in the hog industry.

“It’s an emotional issue, and it’s not a simple issue either,” Jim Wiesemeyer, a long-time Washington analyst, told AgWeb. “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.”

While there isn’t a single, comprehensive ban on China owning farmland across all states, many states have introduced or enacted laws restricting or prohibiting foreign ownership of agricultural land, with a focus on China. That includes Texas, Florida and several Midwestern states that have enacted laws restricting or banning purchases by specific countries, including China.

One of those unintended consequences played out in Arkansas when Gov. Sarah Huckabee Sanders

In 2023, Arkansas became the first state to enforce a law banning certain foreign entities from owning agricultural land, specifically targeting those deemed “prohibited foreign parties.” This action was taken against a subsidiary of Syngenta Seeds , a Chinese-owned company, ordering them to divest their farmland.

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

Sanders was present as USDA rolled out the new plan this week.

“Arkansas led the nation in kicking Communist China off our farmland and out of our state because we understand that farm security is national security,” said Sanders. “I applaud President Trump and Secretary Rollins for putting America first with this bold USDA Action Plan to protect our food supply, our economy, and our freedom.”

It’s an issue that’s not going away. More states are considering addressing foreign-owned farmland with legislation, as well.

🇨🇳There’s a troubling correlation between Chinese-owned farmland in America and the location of our military bases.

🌾Assembly Bill 4781 by Asm. Alex Sauickie, Asw. Dawn Fantasia, and me would stop this in its tracks in New Jersey.

🚨With today’s announcement by the U.S.… pic.twitter.com/1CGA7K9Iwj
— Mike Inganamort (@MikeInganamort) July 8, 2025

States Applaud USDA’s Aggressive Plan

Governors and state agriculture secretaries were on hand for the announcement this week, applauding USDA’s plan.

“Tennesseans know that our farmland is our national security, our economic future, and our children’s heritage. The National Farm Security Action Plan puts America First by defending our farmland from foreign adversaries and protecting our food supply, and I thank the Trump Administration for its bold leadership,” said Tennessee Gov. Bill Lee.

“Farm Security = Food Security = National Security. Thanks to these actions taken by President Trump and his team, we can further protect the backbone of Nebraska’s economy from foreign adversaries like China. Homeland security starts at home, and we will continue to do our part in Nebraska,” Nebraska Gov. Jim Pillen said in a news release.

“I am grateful for Secretary Brooke Rollins’ bold leadership in advancing USDA’s Ag Security Agenda, which prioritizes safeguarding American agriculture and farmland from those who seek to undermine our nation’s food and energy security. Iowa’s multi-generation family farms are the backbone of our state’s economy and way of life. For decades, Iowa has banned the foreign ownership of farmland, a law we strengthened in 2024, to preserve our agricultural integrity and security while balancing the need for foreign business investment in our state. I fully support Secretary Rollins’ and the Trump Administration’s efforts to bolster enforcement, increase reporting, and enhance transparency of land ownership laws at the national level to guarantee that our American farmland remains in the hands of Americans,” said Iowa Secretary of Agriculture Mike Naig.

5 Options to Consider During Farmland Transitions

Thu, 12 Jun 2025 16:30:00 GMT

Transitions are hard. It doesn’t matter what the transition involves, the nature of moving from one thing to the next is complicated. Farmland may be one of the toughest, says Steve Bohr of Farm Financial Strategies in Lisbon, Iowa.

“Farmers often believe that what differentiates him or her is their ability to own the land,” Bohr explains. “And by God, you’re not taking it away from them. A lot of times, land ownership doesn’t transfer until death, and I’m OK with that. But we’ve got to drill down and figure out how that land is going to transition from one generation to the next.”

Over the years, he’s discovered there are three fundamental areas of concern in an estate and farm transition plan that each family should independently address — cost of administration, creditor protection, and transition plans for land and operating assets.

He shares five options to consider for the transition of land assets.

1. Give the land to the farmer.
The first option is to get the land transitioned to those who are farming it or have an affinity to own it, Bohr says. Each generation cannot afford to take a step back in equity and expect to compete in today’s marketplace.

“The clear problem with that is, how are we fair to the ones who aren’t interested in farming? Every family is different,” he says.

If your family is expecting to farm the same (or more) acres with a land base that has been divided across siblings, each generation will be in a weaker position to complete. How many times will your family have to pay for the same land? Which generation will eventually lose it due to no fault of their own (other than choosing to carry on the legacy)?

2. Divide the land equally.
An undivided ownership in real estate can cause great anxiety for the owners of the land who want to farm it or who want to continue to own it, he explains. There is a greater chance of peace if you divide the land, but also a greater chance it gets away from the family.

“Most people believe this is the answer,” Bohr says. “I don’t believe that, because the problem with dividing the land is that it’s a recipe for the land to get away from us. Whether it’s divorce, bankruptcy or poor planning.”

At some point in time, the more people involved, and the more independence those people have, the land’s going to get away from you. If it doesn’t, then it has to be divided again at the next generation. By the time you divide a farm two generations, the grandkids don’t have enough to be able to farm.

“We are dividing ourselves right out of the plat book,” Bohr says.

3. Deed land into a family trust.
Leaving the land in trust after death may be a wise option for families who cannot afford to get the land to one heir and who do not want to divide their land. There are solid reasons to leave the land in trust for management, including if one or more children have marital, money or addiction issues or if one or more children are independently wealthy.

Oftentimes, leaving land in trust gives a false sense of security that may be deferring the problem to the future.

“When we leave it in trust, we’re asking for big problems. Whenever that land comes out of trust, it can be very inflexible,” Bohr says.

4. Create a family land entity.
A land entity like a Limited Liability Company (LLC) or Family Limited Partnership (FLP) has become popular for a family where the first three options do not fit.

“I call this the boomerang plan because the rules in the operating agreement of the entity always bring the land back to the family,” he says.

Those entities will have rules, and within the entities, those rules will talk about lease options and purchase options at family pricing and terms, whatever that looks like. A vast majority of them are special use paid over a 30 -year contract so they can guarantee opportunity and affordability for family members.

5. Develop a hybrid plan.
There is not one plan that fits all families. That’s why a combination of multiple options sometimes works best for most families. A hybrid plan gives everybody an opportunity.

“Right now in succession planning, I think we have to give a huge amount of understanding to what will or won’t cash flow,” Bohr says. “What are the tax ramifications? What is the timing of the transition? And are we going to give an adequate opportunity to those who are going to be that next generation in our communities, paying taxes, going to churches, going to schools?”

Your Next Read: How an Iowa Family is Passing on the Farm from One Generation to the Next

Op-Ed: Secretary Rollins Announces Policy Proposals to Enhance Support for Family Farmers

Mon, 19 May 2025 15:11:37 GMT

Small family farms are the backbone of our nation. Throughout our history, they have secured the promise of liberty made by our Founders. And they are the indispensable foundation of democratic civics and republican virtues. As Thomas Jefferson wrote to James Madison in 1785, “small landholders are the most precious part of a state.”

Today, with my friend Governor Jim Pillen, we kicked off the Make Agriculture Great Again Initiative at Ohnoutka Family Farm in eastern Nebraska. This new policy initiative at USDA will address a series of issues within food, agriculture, and rural America but will specifically focus on challenges faced by small family farms.

We know these challenges, such as labor costs and availability, are not easy ones to address. But we are committed to focusing on the needs of Americans who operate small farms because of their patriotism and commitment to their land.

USDA Steps Up to Address Obstacles
During my time as Secretary of Agriculture, I’ve met with family farmers who have faced too many obstacles as they work to maintain or start new operations.

For example, many small farms lack reliable access to capital. At USDA, we are reforming the Farm Service Agency loan program to streamline delivery and increase program efficiency.

The acquisition of land for new farmers has also become increasingly difficult amid high costs and real estate development. That’s why we’re using prioritization points and regulatory action to disincentivize the use of federal funding for solar panels to be used on productive farmland. And we’re expanding permitting of unused or underused federal land for long-term leases to small farms and streamlining the federal land leasing process so the program works better for farmers and adjacent landowners.

We are also aware many new farmers lack access to infrastructure such as cold storage and processing facilities. To address this disparity, we are working to provide state-level grants for infrastructure tied to the needs of new farmers. And by the end of the year, we will ensure applications for every farmer-focused program are available for electronic submission.

And finally, we are working with governors and state legislators around the country to find solutions to the challenges small farms face. We recently signed a memorandum of understanding with the National Association of State Departments of Agriculture to find areas of collaboration between USDA and the states, which are the laboratories of democracy.

State and Federal Governments Must Work Together
Earlier this month, we hosted a roundtable at USDA’s headquarters in Washington, D.C., with small-farm operators from around the country. We had the privilege of welcoming hog farmers from Ohio, third-generation local producers from Virginia, first-generation dairy farmers from Mississippi, Amish and Mennonite farmers from Pennsylvania, and many others who have devoted much of their lives to the land and their customers.

The Founders did not chart the path of our nation so USDA bureaucrats in Washington can look over the shoulders of law-abiding American citizens.

As I was reminded by the witness of those who visited USDA, the Department of Agriculture was founded so every farming mother and father can raise their children, work their land, and spend time with their families and their God.

This is the mission of USDA, and now, under the leadership of President Trump, is the time to return to the fundamental work that will restore rural prosperity in forgotten communities across the nation.

Based on feedback from the hundreds of small family farmers I have met and talked to over the last 90 days, USDA is now making tangible changes to our policies to ensure family farmers can continue to work their land and new farmers can take on this way of life without obstruction.

While USDA has many programs to assist farmers, we know it takes government entities, non-profits, and the private sector focusing their efforts together to improve the viability and longevity of small family farms.

We were honored to announce this new policy initiative in Nebraska today. The existence and work of small farms are too central to our nation’s history, cultural heritage, and food supply to allow them to slowly disappear from our landscape. To steer clear of a problem that every American wants to avoid, it is imperative that federal and state governments provide proactive intervention so these small operations can preserve their inheritance for generations to come.

New Trends Are Emerging In The Farmland Market

Fri, 20 Dec 2024 22:32:57 GMT

It’s been an interesting few years for the farmland market, with inflation and interest rates largely driving trends. But this year is different as new trends are emerging in the farmland market, including lower farm income and uncertainty surrounding tariffs and trade , the farm bill and renewable fuels/energy .

“Two years ago, we really focused on interest rates. That was a pretty easy conversation. And then last year we focused on inflation, and frankly, that was a pretty easy conversation too. We knew that things would somehow eventually calm down a bit,” says Bruce Sherrick, professor and director of the TIAA Center for Farmland Research. “This year, we focused a little bit more on income. To be honest, that’s a lot tougher to predict.”

People’s Company 2024 Land Values

(Peoples Company)

Considering the combination of lower commodity prices and farm income, it makes sense that land values have softened in 2024. What might be more surprising, however, is that they haven’t declined more.

“When you look at just commodity prices alone and interest rates alone, I think a lot of folks would have anticipated that land values would probably soften more so than what a lot of the survey data and the USDA numbers are showing,” says Steve Bruere, president of Peoples Company. “So, why aren’t land values declining to the degree that maybe your spreadsheet might show that they would? The are themes such as ecosystem services, natural capital, wind and solar, carbon.”

Iowa State University’s (ISU) recent land value survey found farmland values in the state decreased 3.1%, or $369, to $11,467 per acre, and 75 of Iowa’s 99 counties showed a decrease in land values. Bruere believes the decline of land values in the state might be closer to 10% to 15%, based on transactions he’s seen, and there’s likely still farther to go.

“The markets have probably softened more than what the Iowa state survey would reflect,” he says. “I think everybody is incredibly bullish about where the land markets headed over the long haul, but in the short term, there’s some adjustments happening around commodity prices and interest rates.

This sentiment is echoed by respondents to ISU’s survey, as 58% expect a decline in values over the next year while 80% believe land values will increase over the next five years.

“This long-term confidence aligns with expectations of more stable or slightly rising corn and soybean prices, suggesting that while the short-term outlook may be challenging, the market’s foundation remains strong,” says ISU survey author Rabail Chandio.

A Regional Look

Peoples Company 2024 Returns by Region

(Peoples Company)

Looking at the farmland trends by region reveals a few interesting connections.

“When you start to look at some of the stability of returns, you can start to call out those regions where you have more diversity in crop production. The Pacific Northwest jumps out, whereas in the corn belt, you can see a bit of a tracking along some of those commodity cycles,” says Dave Muth, Peoples Company’s director of capital markets. “In 2025, you can plan on farmland across different regions and different systems needing to be looked at more independently.”

Livestock’s role in a region’s income also becomes clearer.

“In 2024, animals and livestock products exceeded, in terms of receipts, crops for the first time. This is a major change because when commodity prices go down, feed prices for livestock also go down,” Sherrick says. “This is having differential effects in supporting farmland values moving forward again.”

3 Takeaways For The Future
The Peoples Company team gives the following predictions for what to expect in the farmland market moving forward.

Land values are increasing long term, but the next year could be more unpredictable.
Record-breaking sales will likely be a bidding war between neighbors who wanted the land instead of a new trend.
Voluntarily bringing land to market just because a neighbor had a huge sale seems to be over - at least for now.

“I wouldn’t be surprised to see a little bit of a pullback, but I think the pullback will still need to be precipitated by some policy or world event that is not present now,” Sherrick says. “Otherwise, I would expect it to be essentially flat. There’s a lot of folks who would like to own farmland still, so I’m not expecting a huge correction.”

Oh, Deer — What A Day on the Farm!

Fri, 22 Nov 2024 20:03:01 GMT

Deer are both majestic and maddening. They make for an exciting pursuit during hunting season, but they also wreak havoc on vehicles, tires and fields.

With approximately 36 million deer in the U.S., those who call rural America home know deer-vehicle collisions are common, especially in October, November and December. Based on this November 2022 study , around 2.1 million deer-vehicle collisions occur annually, causing more than $10 billion in economic losses.

According to State Farm annual analysis , the top 10 states for animal collision, of which deer are the leading cause, are:

West Virginia
Montana
Michigan
Pennsylvania
Wisconsin
Mississippi
Iowa
South Dakota
Virginia
Rhode Island

A Farm Journal reader shared this run-in with a buck.

Deer – semi collision

(Farm Journal)

The Buck Stops Here
In addition to vehicle damage, unsuspecting tractor tires are often no match for deer sheds hiding in fields. Can you relate to these photos shared by fellow farmers?

Deer shed in tire

(Farm Journal)

Deer shed in tire

(Farm Journal)

Deer sheds in tires

(Farm Journal)

If you’ve had one of those horrible, no good, very bad days, or captured someone else’s, share it with Farm Journal. Whether you picked up a deer shed or sunk a piece of machinery in a mudhole, email images to whataday@farmjournal.com.

Shoo Deer — Not In My Field

Deer are a real pest when they graze, trample and bed down in crop fields. Depending on your crop’s stage, this can have economic consequences.

“Deer will feed on immature corn tassel tissue in the whorl during mid- to late-June and also on developing ears in early- to mid-August at the milk stage,” says Bob Nieslen, a retired Purdue University Extension corn specialist. “The decapitated plants usually survive, and ear development will continue through pollination and on to maturity, though the ears are usually less than full size.”

Thieves In Search of Antler Treasure
Awaiting the annual guarantee of antler drop in late winter or early spring, thieves hop private property lines to steal from those who manage. Lust or greed, the lure of shed treasure is a powerful pull to the public, despite purple paint, posted signs and fences.

Whitetail legend Steve Snow is on alert for shed poachers. Like a hot-nose coonhound, he zigzags through timber looking for fresh boot prints — the telltale sign someone is up to no good.

Snow is in hot pursuit of stolen sheds — a dose of frontier justice.

READ: Monster Deer Madness: Iowa Farmer Nabs Antler Thieves, Busts Multistate Shed Ring

Monster Buck Finds Its Way Back Home
Speaking of thieves, when 14-year-old Dave Richmond’s monster buck was stolen , he never gave up hope finding the spectacular rack. Following 14 years of cold-nosing dead-end trails, Richmond was stunned to receive an anonymous message: “I know where your deer is.”

Dumbfounded, Richmond was unable to accept the claim: “Impossible. Just no way. I figured it had to be someone pranking me.”

Two days later, he received a second message, along with an unmistakable photo.

“The picture told it all,” Richmond says. “I was looking at my deer.”

Welcome to a tale of deceit trumped by the enduring faith of a 14-year-old.

Dave Richmond recovers stolen deer antlers

(Photo by Whitetail Obsession Outdoors)

READ: Monster Buck Antlers Stolen from Teen Deer Hunter Recovered After 14 Years

Farmland Trends, Machinery Market and Economic Outlook

Mon, 11 Nov 2024 14:00:00 GMT

On a recent Uplevel Dairy Podcast featuring Lynn Paulson, agribusiness development director with Bell Bank, a prominent theme emerged—understanding farmland trends and how these shifts may impact the broader agricultural community. In an era where precision is key, discussing farmland value trends, the machinery market, and the economic environment offers illuminating insights for producers and investors alike.

Farmland Trends: Highs, Lows, and What’s Next

Paulson highlights the evolution of farmland values, noting that over the last quarter-century, farmland has appreciated significantly, often outpacing inflation. This growth transforms farmland into a strategic investment. However, as many seasoned farmers will attest, purchasing land involves much more than mathematics; emotional factors heavily influence decisions, especially when land holds strategic value.

Despite uncertainties, Paulson predicts that farmland will remain a solid long-term investment. He emphasizes the role of upcoming generational shifts, as a significant portion of farmland is poised for transfer. This transfer, if approached tactically, may stabilize farmland prices more effectively than the broad economic factors influencing the farming sector.

Machinery Markets: Shifts and Strategic Buys

Turning to the machinery market, Paulson outlines a notable shift in recent months. The COVID-19 pandemic sparked robust machinery purchases, driven largely by excess government support and the need to reduce tax liabilities. However, as these waves crest, machinery lots are now filling up, with significant markdowns on equipment prices, presenting opportunities for strategic purchases of late-model used equipment.

For machinery dealers, these developments necessitate a keen eye for forecasting trends. They find themselves aligning with bankers who are vigilant about preparing for potential downturns. The machinery market often signals the economic climate’s direction, preceding transitions in the land market.

Economic Outlook: Challenges and Considerations

Paulson turns a critical eye on the broader economic landscape, particularly the U.S. national debt, which he considers a looming crisis. With the national debt accruing rapidly, the implications for agricultural financing are substantial. Higher interest rates and reduced government resources could pose significant challenges for farmers, emphasizing the need for robust financial management within farms.

Paulson advocates for “bulletproofing” one’s balance sheet—ensuring ample working capital and liquidity. He stresses the importance of realistic financial planning, understanding the true costs associated with family living from a farm’s finances, and setting clear boundaries between personal and business expenses.

In this fluctuating landscape, the key takeaway is clear: proactive management and strategic investment in both land and machinery are critical for thriving amidst shifts in the agricultural sector and broader economic turbulence. Keeping an eye on global trends and preparing financial and operational strategies tailored to those insights can position producers to succeed in the long term.

Your Next Read: How Higher Interest Rates Could Impact Farmers in 2025

How Higher Interest Rates Could Impact Farmers in 2025

Tue, 05 Nov 2024 17:49:00 GMT

The Federal Reserve is expected to cut interest rates this week, which would mark the second time this year. However, the Fed’s decision to cut the benchmark interest rate last month is only providing relief on short-term rates. The mid- and long-term rates have actually gone up, not down.

“The market trades the two-year break-even inflation rate — the expectation of what inflation’s going to average over the next two years,” says Arlan Suderman, chief commodities economist with StoneX Group. “In the last six weeks or so, we have seen it jump a full percentage point. That is a significant short-term jump, saying that reinflation fears are coming back in a hurry.”

Suderman points out the Fed can influence mid- and long-term rates, but the agency can’t control them. Concerns about inflation are pushing those rates back up again.

“That could all change over the next couple of weeks, or it could be reinvigorated,” Suderman says. “Longer term, what I’m looking for is a return to the interest rates we saw in the ‘90s and early 2000. But I think there’s going to be a lot of volatility in getting there.”

Real Rates Move Higher

Krista Swanson, lead economist for National Corn Growers Association, says the day before the September FOMC meeting the 10-year Treasury was at 3.63%, but today it’s 4.21%.

“There are a number of reasons the 10-year Treasury is rising,” she says. “Among those, are market expectations for the Fed to slow rate cuts as recent macro data has reduced recession fears. Investor moves are showing growing confidence in the U.S. economy. In other words, the market is driving real interest rates higher, despite the lower federal funds target range. The federal funds rate is the interest rate that banks charge each other to borrow funds overnight.”

Like Suderman, Swanson says the Federal Reserve can influence the interest rates farmers/consumers/businesses pay on loans through changes in the Fed Funds Rate. However, the amount charged by the lender to the customer includes a spread (their profit) and depends on borrower specific factors such as credit score, size of loan, type of loan, loan term, etc.

Interest Rates

(NCGA)

The Interest Rate Wildcard and Impact on the Ag Economy

When you look at what could impact both livestock and row crop producers the next six months, a major wild card is interest rates. The October Ag Economists’ Monthly Monitor asked economists how much farm interest rates need to fall to find economic stability for farmers, and 46% said 2%.

The Monthly Monitor also asked economists to list topics or stories that could impact agriculture over the next 12 months but aren’t currently getting covered by the media enough. Some economists say it’s interest rates.

“I think one of the things is the return to higher interest rates, which is what we’re seeing play out and how that could negatively impact agriculture at a time when it’s struggling from depressed prices and lingering high input costs,” Suderman says. “As higher interest rates continue that impacts not only your operation costs, your operating note expenses, etc., but it also increases the cost of storing grain, whether you could pay off loans or put that money into interest. All that has an impact on your marketing and marketing strategies.”

Dr. Vince Malanga on U.S. Economy

Dr. Vince Malanga, president of LaSalle Economics, signals future economic stability might be threatened by conflicting survey data, recent steepening of the yield curve and a federal deficit near 7% of GDP.

The real GDP grew at a 2.8% rate during the summer, with inflation at 1.8%, signaling strong corporate profits if sustained, Malanga says. Federal spending and consumption were key drivers, he adds, while trade and construction underperformed. Although business investment was stable, external events such as hurricanes and strikes had an impact.

Malanga also points out long-term rates might be rising due to investor concerns over fiscal sustainability, potentially signaling discontent with growing federal red ink. Housing markets showed signs of a recovery but were negatively impacted by rising rates.

Both presidential candidates have not focused on addressing the deficit, favoring tax cuts and subsidies instead, Malanga adds. The Federal Reserve, which has traditionally stayed clear of fiscal policies, might need to step in, he believes, with Chair Powell likely considering whether to counter deficits or monetize debt.

Malanga’s bottom line: The sustainability of the current growth and low inflation relies on fiscal responsibility and economic adjustments moving forward.

Election Impact on Ag

Ahead of the election, the Ag Economists’ Monthly Monitor asked economists which presidential candidate will be more effective at taming inflation. Fifty-three percent said Donald Trump.

October Ag Economists’ Monthly Monitor

(Lindsey Pound)

The Latest Investment Craze: Farmland

Fri, 27 Sep 2024 00:58:17 GMT

It’s a conversation occurring more regularly in rural coffee shops across the United States: “Who bought the ‘X’ farm that sold last week?” Answer: “An outside investor.”

Farmland currently appears to be something akin to a modern-day gold rush. It can’t be bought up fast enough, while per-acre prices fetched for recent sales set record high after record high.

Flip on your television during a Sunday business show, or open up your social media feed, and you’ll likely see ads for farmland investment brokers like AcreTrader , Farmfolio , and FarmFundr .

These companies provide investment access to farmland via “crowdfunding,” in which the company purchases a farm, then offers investment in fractional shares. The land is either farmed by the company or leased back to private farmers, with proceeds returned to investors.

Delaware-based FarmTogether also offers crowdfunding investment, boasting 7-13% net returns and 3-9% target cash yield. Additionally, FarmTogether provides brokerage services for sole ownership of farms, as well as capital gains tax avoidance swaps via 1031 Exchange transactions.

NASDAQ-traded Gladstone Land Corporation and NYSE-traded Farmland Partners, Inc ., take a slightly different tack, buying and leasing farmland and placing it in a real estate investment trust ( REIT ). In a REIT, investors then gain partial ownership by purchasing the company’s publicly traded stock. Gladstone also actively recruits farmers who are looking to expand via leased acres.

While their approaches vary, all of these companies create access to farmland ownership at a relatively modest investment level, compared to purchasing an entire farm. Each of them touts farmland as a solid investment, weaving in terms like “recession-proof,” “low volatility,” and “superior asset class.”

Across the board, they cite an annual return on investment in the neighborhood of 11.0-11.5%. That jibes with USDA data, which shows a positive return on farmland every year since 1991, with an average annual return of 11.5%.

According to investor site The Motley Fool , that puts farmland ahead of all other asset classes in the past 30 years, except the Dow Jones REIT Index. That’s right – ahead of gold, the S&P 500, bonds, and commercial real estate.

It also likely explains why Bill Gates is the single largest private owner of farmland in the country, with a current portfolio of 242,000 acres in 19 states. And it’s no surprise to anyone living in rural America that the average price per acre of farmland has risen by about 75% over the past 15 years.

Today, fully 40% of U.S. farmland is not owned by farmers, according to American Farmland Trust. In addition to a rising number of domestic investment options for non-farmers, there’s another factor in play: foreign investment.

In 2020 alone, non-U.S. ownership of land in this country grew by 2.4 million acres . And from 2009-2019, the amount of farmland owned by non-U.S. entities increased by 60%.

These trends have some retiring farmers and their heirs circling the wagons in terms of how they sell their farmland when the time comes. Plenty of ground still goes to the highest bidder on the auction block. But some sellers are choosing direct private sales, sealed bids, or non-family farm succession programs to ensure that their family farm remains a family farm.

Land Values Have The Resilience Of a Dandelion

Tue, 09 Jul 2024 13:08:03 GMT

Though the ag economy is facing headwinds in interest rates, inflation and commodity prices, all classes of land across the country have gained in value, according to Farmers National Company’s July report .

“Despite these negative pressures, the land market has remained relatively resilient but is showing signs of settling in general, including single-digit decreases in specific areas,” says Paul Schadegg, senior vice president of real estate operations at Farmers National Company.

The decreases Schadegg references can be found in the eastern part of the country - in states such as Indiana, Kentucky, Ohio and Michigan. The overall stability of the market, however, is something Steve Bruere, president of Peoples Company, chalks up to simple supply and demand.

“Commodity prices are softer and interest rates are higher, yet the farmland markets have been incredibly resilient. That’s because there’s still more capital out there that wants to own farmland than there is supply available,” Bruere says. “I talk to folks who say they want to buy farmland, but they want the market to cool off a little bit. I don’t know if the market will cool off to the degree they think that it should because there’s just not going to be supply.”

Correlation Between Farmland and Inflation
Another factor that might keep the land market from significantly settling is inflation, which, based on data from Peoples Company , is shown to be very strongly correlated with farmland values.

This chart from Peoples Company combines data from USDA, BLS and TIAA Center for Farmland Research to show the connection between farmland values and inflation

(Peoples Company)

“There’s a strong belief that we’re at the beginning stage, because of the fiscal policy in this country, where inflation is going to last quite a while and is going to get much more severe,” Bruere says. “If you believe that and that’s the camp you’re in, then you probably want to own farmland versus being in a fixed income like a T-bill.”

But this doesn’t necessarily mean owners who are considering selling should wait for this environment to occur to get a higher price at auction.

“If you’re considering selling, and you’re saying ‘OK, next year, the farmland market is going to be more vibrant than it is today, so I’m going to wait two or three years’, I think it’s going to take a little while for this interest rate and inflation environment to sort itself out,” Bruere says.

What To Watch
The timelines for inflation, interest rates and global conflict create a lot of unknowns in the market. As always, location and type of land plays an important role in overall land values.

“We anticipate variations in land value changes across our regions in the U.S.,” Schadegg says. “Areas with strong supply/demand scenarios, an expansion of alternative land use projects and irrigation water concerns might experience more dramatic increases or decreases in values.”

This sentiment is echoed by Bruere, who says he’s never been more bullish about land.

“There’s some uncertainty around where farmland is going. But if you have a long-term timeline, there’s just never been a period where you buy a piece of farmland that it’s not going to be worth more at 10 years than the day you bought it.”

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.

3 Trends to Watch in the 2024 Land Market

Tue, 06 Feb 2024 16:22:15 GMT

Will the year ahead bring higher peaks, a flat plateau or dip into a valley for farmland values? Jim Rothermich of Iowa Appraisals shares his insights in how the red-hot land market we’ve seen the past few years is showing signs of cooling off.

“The hyper volume of acres going to auction started happening in mid-2021 and kept going to 2022. As we got into 2023, the first quarter had pretty aggressive numbers going to auction, and then it started slowing down,” he says. “The frequency of $20,000 an acre or more really slowed down in the spring and summer.”

Drought, Interest Rates and No Sale Auctions
As for 2024, Rothermich says the level of drought already occurring in much of the country has potential to impact the volume of land sales.

“[Drought] makes people pull back,” he says. “It seems like with crop insurance we don’t see those valleys as much on a dry year, but we haven’t had a major drought since 1934 or 1936 – so we’ll have to see.”

Another factor to watch continues to be interest rates.

“People call in and say they’re interested in a farm, then talk to their banker and say ‘we’re out’. That’s shrinking the buyer pool, and it’s affecting the market,” Rothermich says. “What I’m hearing from my banker friends is interest rates will eventually go down to 5% to 6%, and that’s going to be the normal. Those 3% to 4% interest rates are a thing of the past.”

He adds there have been several no sales at auction recently, which could impact the market as well.

“We’re going to continue to see some records set in some counties, and we’re going to continue to see sales. But I think the auction companies are going to be more selective in what they take to auction because of the chance of a no sale,” Rothermich says. “They’re going to do more traditional listings. So, I think the volume is probably going to go back to normal.”

Cash Rents Predict Strength in 2024 Land Values
When it comes to cash rents, Rothermich says values remain strong despite lower commodity prices.

“Some of these recent cash rent auctions, there’s just no weakness in it at all,” he says. “A lot of them are three-year terms, so it seems like those tenants are forecasting the next three years to be pretty decent.”

This is a trend he predicts will help keep the overall land market steady in the year ahead.

“I see the market gradually cooling off in 2024,” he says. “It’s not going to fall out of bed because these rents are too strong. I think it’s just going to slowly settle down and go back to normal.”

To hear more from Rothermich, listen to this episode of the Top Producer podcast.

Farmland Values Are Holding Up, But There Are Hints of a Reset At a New Level

Farmland Values Remain Strong, Expected To Stabilize In 2024

Thu, 11 Jan 2024 22:25:26 GMT

After multiple years of record land values, Farmers National Company (FNC) is expecting the market to stabilize in the year ahead.

In their January 2024 land values report, the company shared the sharp increase in farmland values has slowed, and values are holding strong.

“The key point, without a doubt, is resiliency,” Paul Schadegg, FNC senior vice president of real estate operations, shared with U.S. Farm Report. “Even with all the pressures that we’ve seen - some declining commodity markets, interest rates being higher than what we’re used to, and the cost of inputs - we really expected more of a settling of land values. And we really haven’t seen it–no decreases to speak of and still some really strong sales out there in the country.”

Demand for farmland has remained strong as well, though the focus has turned to high quality land that is available in a limited supply – something Schadegg says will help maintain current values.

The limited supply of land is anticipated to continue as some landowners decide to hold their assets due to its value.

“When we look at the seller side, we have many sellers that are looking at their land right now and deciding that it’s never been worth more than it is today and make that decision to sell. But at the same time, some of those sellers are looking at it and at the appreciation in value that they’ve seen over the last 20 to 25 years, and realizing that it’s a very valuable asset that provides them a return and making the decision to hold that land. And that’s keeping a certain amount of inventory off the market,” Schadegg says.

FNC completed nearly 700 transactions across the Midwest in 2023 – a number that is below 2021 and 2022 levels but still above average for the company. Of those sales, 80% of the buyers have been local farmers and operators.

“When this land market it really took off, the primary pool of buyers were operating farmers, and they continue to be the successful buyer of land,” Schadegg says. “But behind that is the investor that is pushing them to the levels they are paying for the land.”

As far as what may come in the year ahead, FNC expects the commodity markets and input costs to play a large role. And while easing interest rates and reduced inflation could help the farmland market, global uncertainty and U.S. political factors remain a wild card.

“Over the past 25 years, average land values have experienced steady growth following the 1980s farm crisis. Under a strong ag economy, Farmers National Company expects that trend to continue,” Schadegg says.

The company breaks down what to expect by region as well.

“Iowa continues to be a strong point, but also, Illinois and Indiana have picked up a little steam. And a lot of the sales that we’re seeing out there are quite strong, in the $20,000 plus range,” Schadegg says. “Another little pocket that has typically not seen a lot of activity in the recent past, but we have here in the last six to 12 months, is northwest Missouri. There’s some very good quality land that hasn’t changed hands much in the past, and there’s been some great competition there.”

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

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.

2024 Land Value Influencers in Your Region

Mon, 04 Dec 2023 21:41:34 GMT

Using a combination of data with boots on the ground experience, Peoples Company has released its fourth annual land values report.

The report shows a three-year period of remarkable land appreciation across the country – something Bruce Sherrick, professor and director of the TIAA Center for Farmland Research at the University of Illinois, says has not been surprising.

“We kind of have a rolling narrative around this and quite often people will remark it’s shocking that farmland almost anticipated inflation or that it’s shocking how well that’s done through time. And I don’t think I’m surprised by that,” he says. “I’m surprised by the accuracy or the degree or the strength of that relationship if anything.”

Annual rates of return have been in the double digits for many regions. In the Northern Plains region specifically, the rate of change in the past year has been especially high.

(Farm Journal)

“In the last year, what we’ve seen is really quite remarkable in the middle of the country,” Sherrick says. “That area has kind of caught up to previous years in the Midwest and Lake states.”

As far as what’s affecting land values in the rest of the country, Peoples Company breaks the data into eight regions.

Pacific West

(Farm Journal)

Annual performance on permanent cropland in the Pacific West and California has suffered in recent years due to a period of low nut prices, tariffs, water challenges and high operating capital.

3 Unique Characteristics of The Permanent Crop Industry

Steve Bruere, president of Peoples Company, anticipates a lot of land transactions in the California market in 2024.

“The amount of irrigated, plantable acreage is shrinking,” he adds. “The acreage left standing will be more valuable over time because of the optionality of what you can grow on it.”

Pacific Northwest

(Farm Journal)

Similar to the Pacific West, the Pacific Northwest has had a period of good returns and offers a lot of optionality of what can be grown on the land. The land values in comparison to its western neighbors, however, are much lower to produce a similar product. That factor – alongside increased access to water resources – allows the region to absorb displaced production from other areas.

“We’re seeing at least that phase of exploration on some of those fresh market crops that may have some compressed acreage and higher water costs to deal with in California looking at the Pacific Northwest, the Columbia River Basin area in particular, as a transition point,” says Dave Muth, Peoples Company’s capital markets managing director.

Southern Plains

(Farm Journal)

The Southern Plains region – Texas and Oklahoma – is experiencing good land value returns despite water issues and labor complications. As these challenges continue, renewable energy projects are becoming key to the region’s profitability.

“Think about it: 20,30, or 40 years ago, when someone was looking to buy a ranch, if transmission lines ran across it, that might take it off the list. Now those same transmission lines are seen as a huge asset,” says Eric O’Keefe, editor of The Land Report. “This emphasis on energy, whether it be in terms of oil and gas or renewables including direct carbon capture, is going to be a complete game changer. I think it’s going to be driving land values in Texas for decades to come.”

Northern Plains

(Farm Journal)

Total returns per year in the Northern Plains over the past three years are averaged at 18.5% - the highest in the country.

“The increase in values have been rather dramatic compared to other parts of the country in the last three-year period. Part of that’s driven by relative yield gains, but it’s also the genetics and the attention to doing genetics for this part of the country by the major seed corn and other seed producers,” Sherrick says. “It has made this a possible competitor for the rest of the country.”

The focus on foreign and corporate ownership in this area also makes it unique in comparison to other regions.

“You see a difference in these types of markets where the farmers aren’t driving values,” Bruere says. “If you take that institutional investor out of the market, it definitely impacts land values and we saw that real time this summer and Kansas and Colorado.”

Delta Market

(Farm Journal)

The Delta Market – Mississippi, Louisiana and Arkansas – has seen the most stable returns over time when compared to other regions across the country, which makes it attractive to outside investors.

“You don’t get necessarily the same swings that we get in the Midwest in this market. And I’m really bullish – you’ve got plenty of water and you’ve got large fields,” Bruere says. “One of the issues we do struggle with in this market is the tenant pool. You don’t have that same competitive nature for tenants that you’ve gotten Midwest.”

Southeast Market

(Farm Journal)

The Southeast – Florida, Alabama, Georgia and South Carolina – has seen moderate returns in comparison to the other regions. The increase in severe weather as well as development in the area leads Sherrick to expect quite a bit of transition in the future.

“I’m actually not worried about land values, hardly at all in this region, for traditional agricultural things,” he says. “Land that gets displaced for a retirement community, a park, golf course or major league baseball facility aren’t reductions in value. They’re just a reduction in the use of it for agriculture.”

Lake States

(Farm Journal)

The Great Lakes region is one Sherrick describes as “still trying to figure out who they’re going to be”.

“There’s great optionality, reasonable acquisition prices and massive increases in land values that have kind of kept the returns high, very correlated with inflation as well,” he says.

Though the yields in the region may not be as high as in the corn belt, the area’s total returns per year over the past three years have averaged 14%.

Corn Belt

(Farm Journal)

Sherrick refers to Illinois and Indiana as indicators and predictors of what’s happening in the agriculture industry.

The region continues to have high appreciation values and above average farm incomes, though transactions have slowed in 2023. The corn belt is anticipated to have continued interest from non-operating investors.

Looking at 2024
Overall, Peoples Company reports the driving factors behind land values are income, interest rates and inflation. As we move into 2024, they expect this will begin to normalize.

Buyer demand is also expected to remain a key player.

“There’s more money that wants to own farmland in there as farmland for sale. That dynamic is not going to change in 2024,” says Bruere. “Right now it feels like interest rates are pulling back a little bit and I think the landmark is going to remain pretty stable 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:

John Phipps: Why Water is the New Oil for Landowners

Wed, 09 Aug 2023 13:38:50 GMT

There are signs that water is the new oil.

This is a question sent in by U.S. Farm Report viewer David Marshall of Lafayette, Indiana: “You’ve covered the subject of foreign land ownership and rightly noted that it’s a very small percentage. I think the issue that we really need to address, especially in the southwestern states, is the purchasing of farmland by corporate entities that have nothing to do with farming but who solely want to obtain the water rights that the purchase of the ground includes. Their main reason for purchasing the land is to have a resource that they can sell to the highest bidder. How long before hedge funds and corporations own all the water rights and the farmer and the public are left to be the highest bidder or do without the needed resource?”

As Mark Twain said, “Whiskey is for drinking, water is for fighting”. While our arguably arcane water rights laws have provided thousands of billable hours for water lawyers in the West, I don’t think we’ve seen anything yet.

“First in time, first in line” may have seemed like a good idea centuries ago when rivers and groundwater appeared inexhaustible, the enormous use by modern agriculture - about 80% of our nation’s resources - is testing the practicality of those laws. I can’t imagine modern lawmakers reforming our laws with the needed speed, so the backup method of acquisition for water consumers is to buy the water needed from agriculture.

Bluntly put, there is a price for every gallon, and many farmers are just now realizing how extremely valuable those gallons are.

As I have argued in every land-use debate -from solar panels to suburban development - with rare exceptions due to location or unique qualities, the rights of landowners should be preeminent to allow the market to redistribute those assets.

Consider the rapidly growing cities of the Southwest, like Phoenix. Spending millions to buy water rights from nearby farmers currently growing alfalfa in the desert to feed dairy cows, when milk is being dumped in Wisconsin, looks to me like an inefficient market hampered by regulation and unable to rationally allocate assets.

Between our outdated milk pricing programs and water laws, the outcome you describe is capitalism’s way of solving a problem. Farming may always be the optimal use for our ever-scarcer water.

I think not, but I think this is a problem being solved by accountants, not lawyers.

Supreme Court Rules Against EPA in WOTUS Case

Tue, 08 Aug 2023 20:10:09 GMT

The U.S. Supreme Court sided with an Idaho couple in a significant environmental case against the Environmental Protection Agency (EPA) over a plan to develop a small lot near Priest Lake. This decision has national implications for water quality, ag, development and the Waters of the U.S. (WOTUS) rule.

The court was unanimous in finding that the land owned by the Idaho family was not subject to the Clean Water Act. The court was split 5-4 on the court’s new “test”, which stated that only wetlands with a continuous surface connection to a body of water are covered by the law.

Related story: What’s Wrong with the Current Waters of the U.S. Rule?

The case focused on the interpretation of the 1972 Clean Water Act and asked for a clearer definition of what the law intended by giving the EPA authority to regulate WOTUS.

Michael Regan, EPA administrator, shared in an EPA press release that he’s “disappointed” by the Supreme Court’s ruling that “erodes longstanding clean water protections.”

"[The administration] worked to establish a durable definition of ‘waters of the United States’ that safeguards our nation’s waters, strengthens economic opportunity, and protects people’s health while providing the clarity and certainty that farmers, ranchers, and landowners deserve,” Regan said. “These goals will continue to guide the agency forward as we carefully review the Supreme Court decision and consider next steps.”

What Supreme Court justices have to say on the WOTUS ruling

Court Justice Samuel Alito, joined by four conservative justices, wrote the opinion stating that the federal government could regulate water that has a “continuous surface connection” to major bodies of water. This ruling overturns a previous decision by a federal appeals court that supported the EPA.

Alito said the EPA’s interpretation of its powers went “too far.”

“We hold that the Clean Water Act extends to only those wetlands with a continuous surface connection to bodies that are ‘waters of the United States’ in their own right, so that they are ‘indistinguishable’ from those waters,” Alito wrote, quoting from past court opinions.

Justice Elena Kagan wrote for the court’s liberals, comparing the ruling to last term’s decision limiting the EPA’s ability to combat climate change.

“The vice in both instances is the same: the Court’s appointment of itself as the national decision-maker on environmental policy,” she wrote, joined by Justice Sonia Sotomayor and Ketanji Brown Jackson.

Justice Brett M. Kavanaugh wrote separately to object to the majority’s reading of the law. He wrote that the majority’s new test “departs from the statutory text, from 45 years of consistent agency practice, and from this Court’s precedents” and will have “significant repercussions for water quality and flood control throughout the United States.” Kagan, Sotomayor and Jackson joined Kavanaugh.

What the ag industry has to say on the WOTUS ruling

Rep. G.T. Thompson (R-Pa.) calls the ruling a “victory” for farmers, ranchers and landowners.

“The decision reaffirms the rights of property owners and provides long-needed clarity to rural America. In light of this decision, the Biden Administration should withdraw its flawed final WOTUS rule,” Thompson said. “It is time to finally put an end to the regulatory whiplash and create a workable rule that promotes clean water while protecting the rights of rural Americans.”

Zippy Duvall, American Farm Bureau president, echoed Thompson, saying the EPA “clearly overstepped” its authority under the Clean Water Act.

“The justices respect private property rights. It’s now time for the Biden administration to do the same and rewrite the Waters of the United States Rule,” Duvall said. “Farmers and ranchers share the goal of protecting the resources they’re entrusted with, but they deserve a rule that provides clarity and doesn’t require a team of attorneys to properly care for their land.”

Background on the WOTUS case

The case began when Michael and Chantell Sackett purchased a vacant lot in a residential subdivision in Idaho in 2004. They acquired the necessary county permits to develop the site, but the EPA argued that the land was subject to its review because it contained wetlands about 300 feet from Priest Lake.

Related story: What Bodies of Water are Considered WOTUS?

This case, having returned to the Supreme Court for the second time, was closely monitored by environmentalists, developers, and farming groups due to the ongoing debate over the extent of the EPA’s jurisdiction beyond navigable lakes, rivers, and into smaller streams and wetlands.

What’s Next for WOTUS?

A court decision against the EPA, said Attorney Rafe Petersen, who represents miners, offshore wind developers and others seeking EPA permit, likely leaves the Biden administration to start all over again from scratch.

“I don’t see how they get away from that,” Petersen said. “The Biden administration is really boxed into the corner.”

The ruling trims the jurisdiction of EPA to regulate waters under the Clean Water Act to interstate and navigable waters and immediately adjacent wetlands. It is a return to the traditional understanding of what Congress passed in the early 1970s.

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.

All Signs Lead to South Dakota

Wed, 31 May 2023 15:00:54 GMT

From labor to rising input costs to tight margins, the list of challenges producers face is endless. However, when it comes to their biggest challenge, regulatory pressure is likely at the top of the list.

Out west, in states such as California, the dairy industry has been impacted by overtime labor rules, rigorous permitting processes and the shortage of water. As a result, cows are migrating toward the center of the country.

“That’s where the dairy processing capacity expansion is primarily happening, and that’s where the cows are heading,” says Roland Fumasi, head of RaboResearch Food & Agribusiness for North America. “It’s being driven partially by all the water challenges in the west.”

But where are the cows going? According to the latest March USDA Milk Production report, South Dakota continues to show impressive growth in terms of dairy cattle. The state added another 13,000 cows and 24 million pounds of milk year-over-year.

The processing growth has led to opportunities not available in other regions, says Evan Grong, sales manager for Valley Queen.

“We anticipate growth in the I-29 corridor will be much slower in 2023 and 2024 as there are no plans for additional capacity,” he says.

“However, due to our expansion project, Valley Queen expects approximately 25,000 additional cows will be added in 2025 and 2026.”

Three Key Drivers

Grong says three main factors attract producers to South Dakota.

“We attribute the current and projected growth in the I-29 region primarily to access to feed production, abundant groundwater and dairy processing investments,” he explains.

South Dakota has grown in number of cows and in pounds of milk produced. Currently, the state has 150 permitted class A farms.

“Like many areas, we have seen a decline in the number of overall farms. But, we are unique in that our cow numbers have risen from fewer than 80,000 in the early 2000s to around 200,000 right now,” says Tom Peterson, executive director of South Dakota Dairy Producers.

Move to I-29

Dairy producer David Lemstra searched for the perfect place to milk cows for a decade. Three years ago, he and his family moved from central California, where they had dairied for more than 40 years.

“Three things led us to call South Dakota home,” he says. “Feed, permits and processing.”

The process to find a new place to milk cows wasn’t easy for Lemstra — it took nearly a decade of research.

“We looked at quite a few states,” he says, adding once they got serious, Iowa and South Dakota floated to the top. Today the Lemstras milk 4,000 cows near the Sioux Falls area and ship to Agropur.

Regulatory Pressures

Lemstra moved east for several reasons, including California’s long-term drought and poorly managed state resources.

“A combination of a lot of poor decisions and poor state political management played a factor in our decision to move,” he says.

Labor is another challenge dairy producers face in the Golden State, but Lemstra discovered the labor situation in South Dakota to be much better.

“Some of the locals say labor is very hard, but they don’t know how hard it can potentially get,” he says. “Out here, there are employees who want to work on farms.”

Lemstra believes South Dakota is set up as a business-friendly state.

“California has the table tilted toward the employee, and the employer must manage through the regulations,” he says, sharing California’s overtime rule added insult to injury.

“It’s not one blow that took us out of California,” he says. “It was death by 1,000 cuts.”

Learning Curve

A big adjustment for Lemstra and his family has been getting used to milking cows in South Dakota’s varying temperatures.

“From severe heat to severe cold to everything in between, this is a new learning curve for us,” he says. “We relied on people who were here already to copy dairy facility designs.”

In South Dakota, Lemstra has agreements with local farmers to grow feed for his dairy.

“I don’t have to worry about that,” he says.

Although, the biggest catalyst that ultimately drove Lemstra and his family to South Dakota was schools and churches.

“We hold those very high, and that was one of the reasons we moved to this area,” he says. “The South Dakota, Iowa and Minnesota dairy community is a fun and tight-knit community.”

Plans for Growth

It’s hard to believe not many years ago, South Dakota wasn’t included in the top 20 dairy states in the country. Today, the I-29 corridor is bustling with cows and a supportive infrastructure that embraces growth.

“We’ve been building up to it to this point, but it comes down to the business-friendly climate that South Dakota has extended to the dairy industry and to all of ag,” says Deb Wehde, a field representative with Agropur. “This has allowed the industry in our state to grow and thrive.”

In 2019, Agropur tripled the size of its Lake Norden, S.D., plant, going from 3 million pounds to 9 million pounds. Wehde says Agropur conducts growth objective analysis to help meet their customer needs and understand their market needs in the future.

“We want dairy producers who are willing to partner with us,” she says. “We have environment, social and governance [ESG] principles, so we need good partners to help us achieve those goals.”

Another factor vital to growth is ensuring a good labor base, which Wehde says spells a win for everybody involved.

In South Dakota, she adds, the dairy industry works alongside the government to find solutions for sustainability goals rather than forcing burdensome regulations with negative impacts.

“We have a great relationship with our producers because we are working toward a common goal,” she says.

Like others, Wehde is optimistic about South Dakota’s dairy future but says economic factors, such as inflation, will impact future management decisions.

“What is inflation, and all these other pressures, going to do to us?” she asks. “Something bigger than the dairy industry itself can impact the industry.”

Travel through South Dakota and you can easily see the open land, which has access to water to grow feed and plentiful processing capacity for new milk. As a business-friendly state that supports dairy, South Dakota has certainly rolled out the welcome mat for producers.

Want to Grow Your Farm? Ask These 10 Questions First

Wed, 17 May 2023 19:57:51 GMT

More than 50% of farmers intend to grow their operation, based on responses in Purdue’s February 2023 Ag Economy Barometer.

(Farm Journal)

If you’re thinking about scaling your farm, Michael Langemeier, Purdue ag economist, says it’s important to first ask these questions.

1. Why should I grow my operation?

Before an operation expands, consider the vision and direction you want your farm to take.

“Are you interested in a commodity-based approach or a differentiated product strategy? Commodities will focus on cost control while products will be centered around value-added production and above-average prices for your crops,” Langemeiers says. “Start here and consider how growth impacts your direction.”

Once an approach is chosen, it’s time to decide which dominoes you want to play in the expansion game.

2. What ways I can grow my farm?

There are many ways to expand an operation: acquire land, new equipment and technology, upgrade facilities, etc. However, Langemeier says some producers need to think outside the box.

“Don’t just think about what you currently do or have always done. This step is a good time to do some soul searching to consider where you want to be in five to 10 years. Do you want to be the same enterprise, or do you want to make changes?”

Langemeier says this soul-searching step is especially important when someone is coming back to the farm.

“We’re seeing that a lot of students who come from farms want to go back, and we have to look into whether there are opportunities there or not,” Langemeier says. “There’s always new interest and ideas that come with the transition back to the farm.”

After establishing how you want to grow, consider your growth approach.

3. What should my growth approach look like?

A strengths, weaknesses, opportunities and threats (SWOT) analysis is a common growth approach in business. Langemeier says another way to think about SWOT is in terms of internal and external analysis.

“Internal analysis means looking at key resources and capabilities of a team or operation,” Langemeier says. “Does someone possess a unique skill you can maximize? Take advantage of those unique skillsets.”

Internal analysis mainly centers around strengths, but weaknesses play a role here, too. Are there areas in your operation that need professional development? Langemeier says this is the time to work on both.

External analysis, on the other hand, examines economic and market trends.

“The easiest example is in livestock; raising pasture pork, poultry or beef, or offering direct meat from a producer rather than a grocery store, are all growing trends,” Langemeier says. “If you have those opportunities, think about how they might fit into your operation.”

While there’s more risk in external factors, Langemeier says “the risk can be worth the reward” for producers who understand what trends they can support.

4. How do I evaluate my farm’s growth ventures?

Now that the growth options are laid out, how does a producer choose which option to pursue?
These eight criteria can help:
• Strategic fit
• Expected returns
• Risk
• Capital required
• Cost and ease of entry and exit
• Value creation
• Managerial requirements
• Portfolio fit

Strategic fit is one of the biggest points to consider, according to Langemeier.

“A few years ago, many growers were interested in hemp production. I would ask them if hemp would require new machinery and if they were used to dealing with contracts,” he says. “If the answer was yes and no, then it probably wasn’t going to be a good fit.”

He says ease of entry and exit is the second criteria he points farmers to.

“If your farm were to pursue a new venture and it fails, would it mean you could lose the whole farm? Because there will be things that fail,” Langemeier says.

If a specific venture requires a lot of capital, he says it is pivotal to explore how the investment could affect balance sheets in the long run.

5. What skills are needed to grow, especially in people returning to the farm?

Taking stock of employees’ skillsets, this is the part where growers consider the strengths and weaknesses of human capital currently on the farm and those soon returning to it.

“When someone’s thinking about coming back to the farm, that’s the time to assess the skills that are currently needed, and then try to encourage the younger person to garner some of those skills,” Langemeier says. “We might have the skills to expand our operation, but do we have the skills to start a new venture in a different enterprise? Think about it from all angles.”

6. How do I finance?

Are you willing to take on debt to expand? If so, how much debt are you willing to take on? Langemeier suggests looking at debt as enabling you to take advantage of an opportunity, not as a negative.

“If you have 2,000 acres and are thinking about adding 1,000 acres, even if that’s leased ground, you’re still going to need more machinery and people. You probably don’t have that retained earnings, so you’re going to take on debt,” he says. “As long as you’re making a profit on those additional acres, and you can make the debt payment, it’s not a problem.”

Langemeier warns that a small profit margin can quickly turn into an issue when a venture flops. He advises producers keep a somewhat equal balance of debt and projected venture profits.

7. What business models do I use to grow?

Expanding internal growth with retained earnings and debt is a typical business model for most operations, according to Langemeier. He says there’s a new trend in this arena.

“I’ve seen a lot of production ag cases recently where a farm acquires assets from a retiring farm,” he says. “Not only do they farm the land, but they also buy the machinery, the bins and the whole farm. This really works for some operations.”

Another model that’s becoming somewhat common is a joint venture. Agribusinesses use this model frequently, but Langemeier says more mid-sized operations are leaning toward this option.

“One of the advantages of joint-venture contract turkey, laying or finishing operations, especially in the Corn Belt, is that there’s a partner with you,” Langemeier says. “It allows us to grow effectively.”

Finding a partner to go-in on the venture isn’t always easy. However, Langemeier says producers often look in the wrong places.

“Some farmers say they don’t have any outside investors, so I tell them to think about family or non-farm heirs. Pitch it as a way of investing in your business so that you don’t have to make them partners or an operating entity,” he says. “Land, for instance, could be an outstanding source of outside equity with non-farm heirs.”

8. How would an expansion impact my current operation?

When considering growth options, it’s vital to your growth success to consider how each option will impact the farm’s balance sheet and income statement. Langemeier suggests running three projected scenarios — worst, most likely and best case — through a spreadsheet or a software, like the University of Minnesota’s FINPACK system .

If you choose to run the projections by hand, this is the process Langemeier suggests:

a. Impacts on cash flow and balance sheet

“A growth change will impact both — don’t just look at cash flow,” he says.

b. Debt versus equity

“Maybe the change will reduce your liquidity and increase your solvency too much,” he says. “If that’s the case, you can’t pursue that particular venture.”

c. Time management

“There are only so many hours in the day, and some of us sometimes work too much,” Langemeier says. “Say you’re going from conventional to organic, it’s going to be management intensive. Be realistic about what you and your team can handle.”

9. What challenges would an expansion create?

Construction delays, cash flow shortages, depleted working capital, short-term inefficiencies and management bottlenecks are often at play when starting a new venture, according to Langemeier. He advises producers to be proactive.

“If a venture creates massive cash flow shortages and eats into your working capital, you need to have a plan to deal with those issues. If you don’t, it will lead you into other challenges, like inefficiencies, and you’ll end up with a failed venture,” he says. “Make sure you have a contingency plan.”

10. What is my sustainable growth rate?

Calculating a sustainable growth rate means saying what a growth rate would be if retained earnings is the only money used, and then compare that to what a growth rate would be if only debt was used. Langemeier says this equation has other variables that often go unchecked.

In the debt scenario, he says you have to think about the downside of debt — the chance of going bankrupt and variability.

“Even if your operating cash flow is low, the lender still wants his payments,” Langmeier says. “You have to think about the coping strategies to make those debt payments even when corn is at $5, compared to $6.50. Make sure you run all the numbers imaginable.”

The Main First Step When Considering Expansion

With all 10 points in mind, Langemeier says the first stage of growth shouldn’t include producers running to formulate a 50-page business plan. He says step one starts with a conversation.

“You should be having regular farm and family meetings, at least once a year, to brainstorm with your employees and family members about the things you could do differently on-farm, and allot time to consider continued improvement, opportunities and threats,” he says.

According to Langemeier, these meetings will offer more than exploring growth; they will ensure farm, family and employee survival.

US Treasury Dept. Moves to Limit Foreign Land Purchases Near Military Bases

Mon, 08 May 2023 20:20:32 GMT

By now, you’ve likely heard of the Chinese balloons that made their way across the U.S. in late January and early February and were eventually shot down. The spy balloons, coupled with a Chinese-owned company purchasing land 12 miles from a U.S. Air Force base in North Dakota, have sounded alarms on both state and federal levels.

To limit further foreign activity on U.S. lands, particularly the sale of land, the Treasury Department’s Office of Investment Security proposed a rule on Friday that would require foreign entities to garner U.S. government approval before they are able to purchase land within 100 miles of eight military bases.

Related story: Out-of-Country Farmland Investors: Here’s What The Numbers Show

Sen. Kevin Cramer (R-N.D.) welcomed news of the proposed rule, which could have blocked the North Dakota land sale to the Fufeng Group.

“This is a good first step to bolster reviews and mitigate threats similar to what we saw with Fufeng,” Cramer said in a statement on Thursday.

The Office of Investment Security is responsible for screening foreign business dealings in the U.S. and has the authority to block or force term changes in sales in order to protect national security.

Backstory on Fufeng Group’s North Dakota Purchase

Fufeng Group says it plans to use the land to build a $700 million corn milling plant, which would create at least 200 jobs, as well as residual opportunities for logistics, trucking and other services.

Many North Dakotans made their sentiments on the sale known, which led to a review by the Committee on Foreign Investment in the United States. However, the committee’s review found no issue with the sale.

Related story: China’s Latest Land Purchase Could Pose Major U.S. Security Risk

“More needs to be done to ensure the U.S. food supply chain is secure and independent,” says Rep. Dan Newhouse (R-Wash.). “If we do not prevent these land grabs, we are failing to protect our farmers, our families and our country.”

In September, Newhouse, along with 50 other members of Congress, asked USDA and other agencies to take effective action in addressing the potential national security risks that appear to arise from this transaction.

Instead of waiting on the government, some states are taking legislative action on their own.

Missouri Puts Up a Foreign Land Ownership Wall

The Missouri Senate made moves on the issue in April when it backed a plan to amend the state’s foreign land ownership threshold from 1% to 0.5%. The bill also includes a provision that would limit foreign countries — including China, Russia, Iran and North Korea — from acquiring farmland in Missouri by Sept. 1.

“We’re not going to allow for foreign ownership in the state of Missouri,” said Sen. Rick Brattin (R-31). “We have to draw a line in the sand today. It protects our sovereignty as a nation.”

Related story: Missouri Moves to Tighten Reins On Foreign Land Ownership

According to the Missouri Department of Agriculture, foreign land ownership in Missouri accounts for 0.36%, just shy of the 0.5% proposed limit. In total, the department says China owns roughly 42,596 acres in Missouri.

Is $620 Per Acre Cash Rent an Anomaly or the New Norm?

Tue, 07 Feb 2023 17:26:34 GMT

As farmers making planting preparations, cash rent negotiations are also underway in some areas.

Jim Rothermich, a land appraiser for Iowa Appraisal , is working to crunch the cash rent numbers available today. He says cash rent prices vary this year, with the largest increases in the cash rent auction market. If leases are negotiated via auction, Rothermich is seeing prices drawing double-, even triple-digit gains.

“The year-to-year leases that are privately negotiated have stable prices,” says Rothermich. “The three-year leases that are privately negotiated, are 5% to 10% higher. And then if it goes to cash or in auction, I’m seeing in Iowa anywhere from 25% to 70% increase in cash rents from the previous rent. In Illinois, I’m seeing 90% to 120% increase from the previous rent.”

As Rothermich watches the cash rent market explode, he says it’s all driven by fundamentals, supply and demand, but also a new online avenue to cash rent.

“What we’re finding out is the demand far exceeds the supplies, and the rent goes up exponentially when it’s exposed to the market,” says Rothermich.

However, it’s also key to note the number of cash rent leases is very small today. While there’s no data that can give an exact percent, Rothermich says it’s very small. Which is another reason why land that is negotiated on the auction market is drawing such eye-popping prices.

Related Story: A New Way to Rent Ground Is Gaining Traction — With Cash Rent Bids In Illinois Topping $600 Per Acre

Cash Rent Auctions

Chris Baumann is the CEO and founder of CommonGround , which was formerly known as Cashrent.com, a company that facilitates cash rent auctions online.

“Before it was word-of-mouth or coffee-shop talk, asking how do I find a different farmer?” he says, “Now, every farmer in our database, as soon as the farm is listed, it is pushed out to every tenant farmer that’s registered with us within a 60-mile radius.”

Only a small percentage of leases are currently facilitated via an auction. However, Baumann is seeing more and more interest every day.

“Over the last two and a half years, our average landowner experiences roughly 39.5% increase in ROI,” says Baumann. “We’ve seen some contracts that haven’t been negotiated in years, and they’ve gone from 60% all the way up to 120% increase in ROI.

(Farm Journal)

Cash Rent Prices Shoot Higher

The highest cash rent auction price with CommonGround happened this month in Illinois. A landowner, who lives in Arkansas, listed a portion of the ground he owns in Fulton County, Ill.

“Previously, I think he was getting around $260 an acre, and he put it up online, and he wound up getting $495 as a high bid,” says Baumann.

Impressed with the price, the landowner decided to try again with another piece of ground also located in Fulton County, Ill.

“Immediately the next day, he put his next piece up, and that wound up getting $620 an acre, which was absolutely unheard of in the area,” says Baumann.

In comparison, the National Agricultural Statistics Service (NASS) reports the average cash rent for Illinois in 2022 was $243 per acre, up $16 from 2021. That’s a record for Illinois, surpassing the previous high of $234 set in 2013, according to University of Illinois’ farmdoc Daily .

(Farm Journal)

Highest Bid Doesn’t Always Win

Even with record prices and large increase in the price, Rothermich points out it’s not always the highest bidder who wins.

“Landlords are in the driver’s seat on a on a cash rent auction, and they decide the terms,” says Rothermich. “They might require the tenant to use cover crops or use certain farming practices.”

In fact, according to Baumann, many times, the landowner cares more about how the land is prepped and cared for, than they do final price.

“It is not solely based on price,” he says. “I would say more often it is not the highest bid that wins. Our landowners make a decision on a myriad of reasons. Maybe somebody wants to give a young farmer a shot at growing his operation to keep him on the farm. That happens quite often.”

Rothermich points out an auction is true price discovery, but not all landowners will win in this new cash rent environment.

“If you are a high-cost renter, if your breakeven points are high compared to the average farmer, and you’re not a good steward of the land, you are going to lose in this environment,” he says. “There’s no question about it.”

Who’s Driving Up Cash Rent Prices?

The concept of cash rent auctions is becoming a hot button topic for farmers, with fear of what it will do to cash rents overall. Some farmers say there’s little upside for farmers, and as information flows more freely, it actually removes the last few bits of security for renters.

“I would say we’re not driving up cash rental rates, it’s your fellow farmers that are actually being more competitive, more aggressive,” says Baumann.

Rothermich understands farmers’ concerns, but on the flip side, record farmland sales have sparked more interest from landowners questioning what’s fair market price if they’re currently getting enough for cash rent.

“This is what I hear the most from landowners, they say two years ago, my tenant told me that they couldn’t pay any more rent because the input prices went up so much. They’re also telling me this year they can’t pay more because input prices are going up so much. And landowners are saying they don’t know if they believe the farmer’s not making any money,” he says. “That’s really what is getting the questions going; they’re seeing these high land prices and their income on their farm for cash rent has not changed.”

Illinois Posting the Record Cash Rent Prices

While Iowa has been the hotspot for record farmland prices, Rothermich points out Illinois is leading the way for record cash rent.

“With the information I get from Illinois, that’s even a hotter market in Illinois, and there are farms that have went from the $300 acre range to $600 an acre rent for a three-year term,” says Rothermich.

As more landowners opt to privately negotiate terms, but both Baumann and Rothermich think cash rent auctions could continue to gain traction across the U.S.

Related Stories:

A New Way to Rent Ground Is Gaining Traction — With Cash Rent Bids In Illinois Topping $600 Per Acre

2023 Cash Rent Outlook: Be Ready for Higher Rates

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

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