January 2017 Land Expo Review

20 Feb 2017, Posted by Kelvin Heck in Kansas Land Value
Farmland Time and Holding Periods

I recently attended the People’s Company 10th annual Land Investment Expo in Des Moines, Iowa along with 600 of my closest friends. In all seriousness, this is a fantastic day with a variety of speakers and topics ranging from the Land Conservancy to used farm equipment values to economic forecasts of various markets. As is true with many events such as this, one of the primary values is the networking with other brokers, land owners, farm operators, crop insurance agents—all of the people who thought this might be an interesting event.

 

Open Farmland Time and Holding Periods Table

 

Peoples Company

January 2017

Land values in the U.S. saw an extremely bullish run-up shortly after the 2009 recession and continued until 2013-14, and have turned to a softening mode since. This is a broad generalization depending on geography and the quality of the soil—the more productive land has seen less of an impact than the more marginal soils, and location is always a factor, whether it be proximity to a community or proximity to a grain facility, or a number of strong farm operators nearby. If you look deep enough, there are always good reasons why some land sells for a better price than other land.

One of the takeaways from the conference was the long term value in owning farmland. For the most part, the people who attend this conference are not land flippers—they are not buying land to hope to sell it next year or the year after for a significant profit. That’s just not the way land works for most people. It is usually viewed as a long term investment. One of the presenters, Bruce Sherrick, from TIAA Center for Farmland Research at the University of Illinois presented some extremely useful and enlightening information to confirm the returns land has provided over the past 45 years. The chart “Farmland: time and holding periods” shows this very well.

There is an old axiom in real estate that I heard many years ago that “time cures all mistakes in real estate.” While none of us wants to make a mistake, even buying land in the mid 1980’s, which was the absolute worst time to buy, still would have worked out pretty well if you were in it for the long haul, meaning at least 10 years. For any other time to buy land, the investment performed very well when compared to other measures such as the S&P 500, gold, AAA bonds, and 30 year mortgages. Judging from the charts provided by Sherrick, a good portfolio would include investments in farm land, the NASDAQ, and REITs. The beauty of farm land is that it is always there, you can touch it and see it, and like they say, “we’re not making any more of it”.

 

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Does the farmland market make sense?

 

Farmland Returns in context - 1970-2016

Farmland Returns in context - 1980-2016

Farmland Returns in context - 1990-2016

Farmland Returns in context - 2000-2016