Source: blog by Randy Dickhut, Senior Vice President – Real Estate Operations, Farmers National Company, Omaha, NE
One of the effects of Covid-19 has been a heightened interest in farmland in the US. There are many reasons for this including an awareness of the importance of the food supply chain, some investors are searching for a safe, long-term real estate investment, others are wanting an inflation hedge, and still others are seeing the 2.5-3.0% Return on Investment that farmland delivers as a good alternative to CD and bond rates.
On top of investor interest, farmer interest in buying cropland has increased with improved farm income coming on the heels of large government payments in 2020 along with rising grain prices.
Growing interest in agriculture and the farmland market in particular can be seen in the financial media too as well as increased attention from the ag media. As an example, comments and articles by Farmers National Company and its executives have or will appear in the Wall Street Journal, Forbes, Reuters, and others including foreign based publications as these outlets look for experts in the field to make sense of the market. Increased media interest is a result of not only the Covid-19 effects, but the recent up move in farmland values that we are seeing.
In the actual farmland market, we have previously discussed the increased interest by individual investors to own farmland or add to their land holdings. Also, farmers became more aggressive in bidding for good cropland starting in the fall time frame. Farmers typically purchase 60-80% or more of the good cropland that comes up for sale in any given area, so they are the most active drivers of the farmland market. Couple their interest in buying land with the few more individual investors stepping into the market, and demand for farmland has risen which has pushed land prices higher.
Will this increased interest in farmland by producers and investors continue? Most would say that for the foreseeable future, it will be based on the underlying factors remaining in place. As for the increased media attention, that will probably wain as new stories and the latest trends garner attention. But to the ag press and about everyone involved one way or other in agriculture, farm and ranch land and its value, will always be of interest to farmers and ranchers.