Is now the best time to invest in cropland? Farmers National Company, the world’s largest farm real estate and management company, has scheduled a seminar to answer that question.
The recent decline in commodity prices has put a temporary halt to the growth in land values that reached double digit annual appreciation over the last few years. As a result, this current pause in the value of cropland may have created some excellent investment opportunities.
As Warren Buffet put it, “The most common cause of low prices is pessimism — sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”
So should an investor be concerned about the current price of cropland? If one were to observe return on investment over the last 60-year period he or she would see that farmland, on average, returns over 12.5 percent a year to investors, when figuring in both rental income and appreciation of the land itself. That figure includes all dips in farmland prices.
It would also show that good cropland rarely declines in value, so that cropland can usually be counted on to increase, or at a minimum hold its value, while at the same time providing annual income through rentals. Even in the current market it’s not top quality cropland that has declined in value, it’s marginal land that has taken the biggest drop. Good cropland is holding its own.
“For the cautious investor, Farmers National Company is uniquely positioned to serve as the entry point into the cropland market,” said local broker Bill Gaughan. “As the world’s largest farm management company we don’t just walk away from a client when the sale closes. We can work with a client for years into the future to assure that their investment stays lucrative, and to protect their interests. Utilizing Farmers National Company to source and manage your farmland means that we have a fiduciary responsibility to protect your investment long after the property sells.”
Even clients who are investing in farmland for the first time can do so with a huge amount of confidence because Farmers National Company will support them for as long as they want. Not only can Farmers National Company find farmers to rent the land, determine the best agricultural practices, negotiate the best lease and market the grain, but, depending on the lease type, by leveraging Farmers National Company’s immense buying power clients may be able to purchase all needed supplies at the lowest possible prices.
The biggest change seen with lower commodity prices is that farmers are less likely to commit to long term cash rent leases. This makes the services of Farmers National Company even more valuable, as the company can guide investors through more complex lease arrangements that return satisfactory results but require the experience and expertise of a professional farm management team.
The most common way for investors to determine if they are interested in cropland is to attend one of Farmers National Company’s popular series of seminars for cropland investors. The next seminar will be held in Overland Park at 2 p.m. and repeated at 7 p.m. Dec. 17. The seminar covers the entire process of how to source, purchase and maximize income from farmland.
After the seminar investors can meet with Farmers National Company to determine their individual goals. Some may need a lender; others will want tenant farmers found. Others want information on succession planning, tax impact, liability management and more.
Seating is limited, so while the seminar is free, attendees are asked to register. For location information and registration, visit www.KCLandSeminar.com, call 913-837-4665 or email WGaughan@farmersnational.com. On the web you can visit FarmersNational.com/KC.
Farmers National Company, an employee-owned company, is the nation’s leading farm and ranch management and rural real estate sales company. Farmers National Company has sold over 3,500 farms (over 1,100 at auction) for more than $2.37 billion during the last five years and currently manages more than 4,850 farms and ranches (2.1 million acres) in 24 states. Additional services provided by the company include auctions, appraisals, insurance, consultation services, oil and gas management, forest resource management, lake management, FNC Ag Stock, and a national hunting lease service. Visit the Farmers National Company website at www.FarmersNational.com.