From the potato fields of Michigan to the high prairies of Kansas, farmers are receiving record prices for their land — but economists and banking regulators warn that this boom, like so many before it, could end badly. Across the American heartland, farmland prices are soaring. In places like Waco, Neb., and Chickasaw County, Iowa, where the boom-and-bust cycle of farming reaches deep into the psyche, some families are selling the land that they have worked for generations, to cash in while they can. Behind the rush is the age-old driver of farm booms: high crop prices. Corn, in particular, has been soaring, reflecting demand overseas and, domestically, for ethanol. High prices mean good profits for farmers, and many are using their growing incomes to bid for land. Sensing opportunity, investment firms are buying, too. David Taylor, of Oskaloosa, Kan., said he was saddened to sell his family’s farm but that the prices were too good to resist. Four generations had planted corn and soybeans on the 146-acre spread. But after living through the Midwest farm crisis of the 1980s, when land values plunged, and realizing that his children would not follow in his footsteps, he sold the farm at auction in December. “I bawled like a baby,” Mr. Taylor, 59, said. His crop-producing fields sold for $10,100 an acre. In Iowa, despite the drought last year, farmland prices have nearly doubled since 2009, to an average $8,296 an acre, far surpassing the last boom’s peak in 1979. In Nebraska, the price of irrigated land has also doubled since 2009. But if the price of corn falls — and...
Link to full article Why investor capital might be good for farm business Mark Twain might have unintentionally summed up the future of farmland ownership in his story, “The Prince and the Pauper.” The plot is familiar: Two people from different backgrounds trade jobs, walk in the other’s shoes and return home smarter. Five years ago, farmers and Wall Street executives started doing the same thing. Instead of achieving mere understanding, though, relationships farmers and business executives form create returns for both parties—with potential for higher profits in light of lower crop prices. “We’re still getting about a phone call every couple of weeks from someone who’s interested in starting a fund to invest in ag ground,” says Peter Martin of Kennedy & Coe, among the nation’s largest accounting and consulting firms. Nearly two years ago, Westchester Group founder Murray Wise “speculated that as much as $10 billion in institutional capital is searching for a home in U.S. agricultural land,” wrote Michael Fritz of the Farmland Intelligencer Blog. Westchester Group manages farm assets and is majority-owned by TIAA-CREF, a retirement fund manager. Now, the time has come for top producers to think seriously about farmland investments, experts say. Many farms are on the verge of transitioning to the next generation. Others want to expand. Both can benefit from the strong suits of institutional investors: deep business knowledge of multiple industries, capital to sustain growing operations, and a commitment to furthering sound agronomic practices in addition to environmental stewardship. Worries On Both Sides. For years, investors avoided farmland investments because they didn’t understand the opportunities. The stock market crash of...
Shonda Warner: Farmland Investing Is Here To Stay Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hi everybody, and welcome to HardAssetsInvestor.com. I’m Mike Norman, your host. Well, what about farmland as an investment? We’re going to talk about that today with my guest, Shonda Warner, who is the managing director of Chess Ag Full Harvest Partners. I hope I got that right. Shonda Warner, Managing Director, Chess Ag Full Harvest Partners (Warner): That’s correct. Norman: Thank you very much for coming on the show. So, farmland? It kind of makes a lot of sense if you think about the last several years. We got a tremendous boom in agricultural commodity prices. And you know, we’ve heard people talk about, “Hey farmland’s a great investment; let’s go into it.” But you’ve put together an actual fund that does just that. Tell me about it. Warner: Correct. Well, the fund itself is a limited partnership. And under that limited partnership there’s a private REIT, which is quite a tax-efficient way to own farmland. And there’s some hedging companies and holding companies to deal with other assets that don’t neatly fit into the REIT structure.Norman: So you go out, you actually buy farmland. This is all around the United States.Warner: All around the United States. Norman: Then what? You lease it out to farmers, to produce crops on that land? Warner: Yes. Norman: And the investors receive a cash flow? Warner: Yes, they do, every year, a coupon. They clip a coupon just like a bond. Norman: How does that compare, let’s say, relative to, currently, stocks or bonds? Well, bonds, it must, because it’s like zero percent...
Betting the farm As world population expands, the demand for arable land should soar. At least that’s what George Soros, Lord Rothschild, and other investors believe. By Brian O’Keefe, senior editor (Fortune) — On a sunny Friday morning, Shonda Warner and I are in her red Toyota pickup heading southwest on Highway 61 out of Clarksdale, Miss., on our way to see one of her farms. While her black standard poodle, Walter, naps in the back seat, she’s explaining the pitfalls of being an institutional land investor. “It’s really hard to buy property at the right price,” says Warner as we roll past the famous crossroads where Robert Johnson is said to have sold his soul to the devil to get the secret of the blues. “Half of all farmland that trades in the United States never sees a broker. We believe you’ve got to have a lot of local knowledge of the marketplace. Farmers are smart and they talk. And if one Town Car full of Wall Street types rolls into town and makes a bid, suddenly all of the prices go up.” A Nebraska farm girl who went on to a globetrotting career as a derivatives trader for Goldman Sachs (GS, Fortune 500) and then as a hedge fund executive in London, Warner, 45, is back on the farm pursuing what she believes is a huge moneymaking opportunity. Two years ago Warner launched an investment firm, called Chess Ag Full Harvest Partners, with a fairly simple underlying strategy: Buy undervalued farmland in the U.S. and profit from the coming global agriculture boom. Last June she closed her...
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