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As a farm operation, this question is a central driving factor to profitability and sustainability. It ties up capital, is hard to acquire, and often comes with factors that are hard to mitigate, like poor neighbors, bad drainage, irregular shaped fields, and prior use restrictions. Each one of those factors has a unique score to any one potential buyer of land based on their tolerance for obnoxious neighbors, access to more capital to insert tile, size of equipment and desired crop. No one answer will fit all.

It is interesting to consider the long-standing observation of they are not making any more land. A more telling observation might be, we are losing production acres every year. Consider the population on July 1, 1970 was 3.7 billion people. Since then, we have added 4 Billion people and are projected to be at 10 Billion people on the planet by 2055. The take away from that is that those people need to live some where and those people all want to eat. In the next 40 years, it is projected that farmers must produce more food than the previous 10,000 years combined. That requires resources like land.

Since 1982, land developed for residential/commercial and industrial use has risen 58% in the United States but still only accounts for 5.8% of the total land use in the United States. Of the 1.94 Billion acres in the US, the federal government owns 20.6%, 2.6% is water, and 71% is classified as rural, with 18.5% in crop and 27% in rangeland or pasture.

Who owns the land other than the government? John Malone and Ted Turner (Of Turner Broadcasting Station) each own about 2,000,000 AC and 1.35 billion is owned privately all together, with 30 million of those acres held by 100 persons or companies. Ag focused investment funds are putting billions of dollars into landownership.

Why are they buying? They believe in general land provides stable long-term returns, they recognize that the global demand for food is on the rise between population and increased buying power of emerging nations. The resources under the ground (which is the only other place to get something if we can’t grow it) like natural gas, oil, and a place to site a wind generator, are going to increase in value as demand for energy increases. These investors also recognize the loss of land that can be put to farming and, in the US, specifically, despite our political theatre, is a stable environment to do business in.

Returns on farm land investing have run between 7% and 12% since 2014, while a 4.7% average since 1990. And a 40-year average return of over 10%, which beats the stock and bond market on an annualized basis for the same time period.

Sometimes, we are busy with the tactical level of farm ownership such as can we make the payment and how does this work with our crop cycle, we fail to contemplate the long term advantage of holding the ground for its own sake.

Saturday, December 14, 2019
  • Patrick B. Dillon
  • Jill Dillon
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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