Blog

The USDA’s Foreign Holdings of US Agricultural Land shows foreign investment in US farmland rose slightly last year. Nearly 21 million acres of agricultural land, a relatively small number, in the US is held by foreign owners. That’s about 1.6% of all land. As has been the trend for the past several years, we continue to receive serious inquiries about direct foreign investment in US farmland. It’s not difficult to see why high quality US farmland would be very attractive. Over the decades, farmland has been an effective inflation hedge; it provides consistent , low risk returns; its vacancy rate is effectively zero from year to year; and it enjoys arguably the lowest political risk to owners compared to other prime global farmland regions. We expect continued interest from foreign investors – right along with US investors – seeking wealth preservation and reliable returns.

September 28, 2009
58.34 Acres (49.30 Tillable Acres)
Washington Township, Cass County
Northern Indiana
Productive Farmland
Sold as one tract
Sold for $325,000 to one buyer

September 29, 2009
139.10 Acres (136.20 Tillable Acres)
Ervin Township, Howard County
Central Indiana
Good Farmland
Tract 1: 52.43 acres; all cropland
Tract 2: 41.67 acres; all cropland
Tract 3: 45 acres; all cropland

Sold for $704,000 – Tracts 1 & 3 sold to one buyer for $512,000; Tract 2 sold for $192,000 to another buyer.

These are more sample sales that demonstrate the continued strength in the cropland market here in Indiana and the eastern Corn Belt. As a firm we see good interest in cropland and this sale is indicative of that trend.

What are land values doing? We are asked this question several times a week. The assumption is that lower commodity prices equal lower land prices. This is not necessarily true. In mid September, the land sales conducted on three properties in central Indiana, demonstrated that the demand for good cropland is still high. All three farms sold 10% to 20% above appraised value during spirited auctions. The primary bidders are farmers with buying capacity and investors looking for a safe investment.

Demand for rural home sites, timber land, and recreational land remains low. Potential buyers have less disposable income or are less willing to spend what funds they have on long term real estate investments with little or no annual return. Location is the major factor affecting these values.

At a recent meeting at the Purdue Agronomy Farm, our entire staff discussed rental terms for 2010.

• 83% of our farm managers thought demand for farmland to rent would remain the same as or higher than in 2009.
•  81% said rental rates would be steady with the balance of the managers stating that rates would increase slightly.
• 66% said they would implement cash-flex leases or some other lease in favor of a standard cash lease to increase income for their client.

In summary, demand for good farmland, to rent or buy, remains high. Land values and rental rates will remain strong for the upcoming months.