Ag News

Investing in Farmland: A Real Estate Investor's Guide

There are approximately 911 million acres of farmland in America, according to the U.S. Department of Agriculture (USDA). Farmers and ranchers own about 61% of the land they use, renting the rest from third-party landlords. While other operators own 8% of this land, investors groups (including retired farmers) hold the remaining 31% of America's farmland, with 21% owned by non-operating individuals or partnerships and 10% held by corporations, trusts, or other owners.

Given this breakdown, non-farming investors own a small slice of the country's farmland. That piece, however, has been growing as more investors acquire productive farmland as part of their investment portfolios.

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Number of US Farms Down 3% in Five Years

Based on a midyear survey, the USDA estimates there were 2.023 million farms in the nation in 2019, a tiny decline of 5,800 farms from the previous year. The change is more dramatic when the time frame is widened — there are 3% fewer farms now than there were in 2014, and the amount of farmland, 897.4 million acres, or 1.4 million square miles, fell by 1.3% during that five-year period.

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Why Farmland Now?

Farmland continues to provide strong and consistent risk-weighted returns relative to other asset classes, and its performance is unique relative to other financial products due to its relatively low volatility, negative correlation with equities, and consistent performance throughout economic cycles.

Farmland also has a history of preserving capital in times of economic downturns, and is currently delivering annual income returns above government bond yields in developed countries.

The current low interest rate environment is a function of poor economic growth and a low inflationary environment. Government bond yields in all major developed economies have declined in recent decades.

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Farm Bureau Survey: Farmers Cautiously Optimistic About Future Farm Economy

USDA recently projected net farm income, a broad measure of farm profitability, to rise 3% in 2020 to the highest level since 2014. In fact, USDA data suggests that farm profitability has been on the rise since 2016, e.g., A Tale of Two Farm Incomes. Moreover, at USDA’s 96th annual Agricultural Outlook Forum USDA projected higher crop prices for soybeans, wheat and cotton (not for corn) and higher livestock prices for cattle, pork, dairy and some poultry products (not broilers).

In order to provide additional perspective on the farm economy, the American Farm Bureau Federation conducted an informal online survey between Jan. 8 and Feb. 14. Nearly 300 respondents completed the survey with high participation across the Midwest. Nearly 80% of the respondents identified as a farmer or rancher and the primary farming activities represented included crops, cattle and calves, followed by dairy, other livestock and specialty crops.

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USDA Agriculture Innovation Agenda

During the annual U.S. Agriculture Outlook Forum in February, USDA Secretary Sonny Perdue announced a bold agenda for USDA for the next 30 years. The “Agriculture Innovation Agenda” sets goals of increasing production by 40 percent while cutting the environmental footprint of U.S. agriculture in half by 2050. Some of the agenda benchmarks include:

• Food loss and waste:  Reduce food loss and waste by 50 percent in the United States by the year 2030.
• Carbon Sequestration and Greenhouse Gas: Enhance carbon sequestration through soil health and forestry, leverage the agricultural sector’s renewable energy benefits for the economy, and capitalize on innovative technologies and practices to achieve net reduction of the agricultural sector’s current carbon footprint by 2050 without regulatory overreach.
• Water Quality: Reduce nutrient loss by 30 percent nationally by 2050.
• Renewable Energy:  Increase biofuel production efficiency and competitiveness to achieve market-driven blend rates of 15% of transportation fuels in 2030 and 30% of transportation fuels by 2050.

2020 Agriculture Outlook

USDA Chief Economist Rob Johansson presented the outlook for U.S. agriculture for 2020 during the Outlook forum. His speech and accompanying slides detailed the uncertainties in trade and exchange markets during 2019 as well as the historically bad weather. His outlook for 2020, for now, is less uncertainty for U.S. agriculture with an assumption of more normal trade than in 2019. Soybean, cotton, and wheat prices are forecast to rise modestly, corn and rice prices to decline (see top of page 6 of written speech).

Risk Management Agency Releases Hurricane Endorsement

Last week the Risk Management Agency (RMA) released a new crop insurance endorsement, Hurricane Insurance Protection – Wind Index (HIP-WI). HIP-WI covers a portion of the deductible of the underlying crop insurance policy when a county, or county adjacent, is within the area of sustained hurricane-force winds. 

The coverage provided by HIP-WI can be combined with the Supplemental Coverage Option (SCO) and the Stacked Income Protection Plan (STAX) when acreage is also insured by a companion policy. HIP-WI provides coverage for 70 different crops and is available in counties in the vicinity of the Gulf of Mexico and the Atlantic, as well as Hawaii. The deadline to purchase HIP-WI coverage for the 2020 crop year is April 30, 2020.

Farm Service Agency Announces New Conservation Program

The Farm Service Agency (FSA) announced a new pilot program that enables farmers in the Prairie Pothole region to receive payments for planting cover crops on their land for three to five years. The Soil Health and Income Protection Program (SHIPP) pilot is available through the Conservation Reserve Program (CRP) to producers in Iowa, Minnesota, Montana, North Dakota and South Dakota. The signup for this pilot starts March 30 and ends August 21, 2020.

Through SHIPP, producers have the option of three-, four- or five-year CRP contracts to establish cover crops on less productive cropland in exchange for payments. This pilot enables producers to plant cover crops that, among other benefits, will improve soil health and water quality while having the option to harvest, hay and graze during certain times of the year. Up to 50,000 acres can be enrolled.

USDA Eases Hemp Rules

Last week the Agricultural Marketing Service announced it will relax testing requirements for hemp and allow farmers to dispose of “hot” crops themselves. Under the new guidance, USDA will delay enforcement of the requirement for labs to be registered by the Drug Enforcement Administration (DEA) and the requirement that producers use a DEA-registered reverse distributor or law enforcement to dispose of non-compliant plants under certain circumstances. Enforcement will be delayed starting this crop year and until Oct. 31, 2021, or until the final rule is published, whichever comes first.

USDA Announces WHIP+ Expansion

U.S. Secretary of Agriculture Sonny Perdue announced additional disaster assistance available to agricultural producers, including producers impacted by drought and excess moisture as well as sugar beet growers. The expanded coverage was provided through the FY 2020 appropriations bill. 

USDA’s Farm Service Agency (FSA) will open signup on March 23 for producers to apply for eligible losses of drought (D3 or above) and excess moisture. USDA is also entering into agreements with six sugar beet processing cooperatives to distribute $285 million to grower members of those cooperatives who experienced loss.

Welcome New Members

Help us welcome our newest members to ASFMRA! We are thrilled that you have chosen ASFMRA as the organization to be affiliated with. Because of you, ASFMRA continues to grow and support rural property professionals across the nation!

We are recognizing new members of the Society on a monthly basis. You may recognize your colleagues in the following list and we encourage you to welcome them into ASFMRA!

New Members

• Raegan Bannon with Jeff Harris Real Estate Appraisal in Folsom, NM (New Mexico Chapter)
• Madisyn Beyer in Coarsegold, CA (California Chapter)
• Allison Bishop in Manchester, IA (Iowa Chapter)
• Sandra Cortez in Lindsay, CA (California Chapter)
• Garrett Dismukes with Mississippi Land Bank in Starkville, MS (Mid-South Chapter)
• London Fergus with Powell Banz Valuation, LLC in Salem, OR (Oregon Chapte)
• Lee Folsom with Ameris Bank in Adel, GA (Georgia Chapter)
• Erin Giesler with Bierschwale Land Company in Junction, TX (Texas Chapter)
• Eric Hembrough with Compeer Financial in Normal, IL (Illinois Chapter)
• Jake Holoch in Le Roy, IL (Illinois Chapter)
• Forrest Holoubeck with Farmers National Company in Kearney, NE (Nebraska Chapter)
• Taite Johnson with Warren Land & Livestock Inc. in Billings, MT (Montana Chapter)
• Trent Johnson with Warren Land & Livestock Inc. in Billings, MT (Montana Chapter)
• Jeffrey Jones with Valbridge Property Advisors in San Antonio, TX (Texas Chapter)
• Catherine Kirchner in Big Timber, MT (Montana Chapter)
• Jacob Meyer in Dublin, OH (Ohio Chapter)
• John Nosbisch in Menlo, IA (Iowa Chapter)
• Matthew Pullen with Northern Plains Appraisal in Brookings, SD (South Dakota Chapter)
• Alex Rhoda in Heyworth, IL (Illinois Chapter)
• Cynthia Staake in Chapin, IL (Illinois Chapter)
• Andrew Swanson with Syngenta in North Bend, NE (Nebraska Chapter)
• Matt Vangilder in Bryant, AR (Mid-South Chapter)

Share Your Experience - Make A Referral

You know first-hand what a great organization ASFMRA is and what it means to you both professionally and personally. We thank you for spreading the word, you are the driving force behind our continued growth! Talk to those you know who would benefit from ASFMRA’s educational offerings, networking, and meetings. Let them know your experiences of being involved in this great association and some of the business contacts you have made along with lasting friendships. Your peers listed below have done just that! They spoke to individuals about ASFMRA and those individuals have now become members of ASFMRA!

• Maria Boerngen
• Thomas Courson
• Blake Florell, AFM
• Brian Gatzke, ARA
• Jeff Harris
• Jeffrey Hignight, AFM
• Allan Husby, ARA
• Robert Kacvinsky
• Tyler Mullins, ARA
• Paul Bierschwale, ARA
• James Rebhuhn, AFM
• Paul Reisch, ARA
• John Robertson, Jr., ARA
• Kirk Sagouspe, ARA
• Melissa Sandlin, ARA
• Lawrence Saucer, ARA
• Dale Vogl, AFM, ARA
• John Widdoss, ARA
• Wendong Zhang

Thank you to all who have referred someone and in some cases, more than one, to join ASFMRA.