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December 2009 Archive for Your Precious Land

RSS By: Mike Walsten, Pro Farmer

Mike Walsten has covered major business trends in agriculture for more than 40 years.

Hedge Fund Turns To Farmland

Dec 29, 2009

Mike Walsten

A newly established hedge fund will soon invest in American farmland, reports The Sundy Times. The story, written by Kate Walsh and published December 27, 2009, states Optima Fund Management, with offices in New York, London and Bermuda, has launched a $100 million fund to invest in arable land in Arizona and vineyards in California. The fund is called American Farmland Company, which will buy up to 15 farms totaling 10,000 acres. The average size of the farms will be 500 acres, The Times reports. American Farmland Company will manage the farms.

The story states fund manager Dixon Boardman believes: "that economic recovery, continued population growth and increased incomes, especially in emerging markets, will create rising demand for food." Sound familiar? It should to any subscriber to LandOwner.

This fund is not the only one to announce plans to invest in farmland. According to the website FINalternatives, Pharos Financial Advisors recently launched a $350 million private equity fund to buy and manage farmland in Eastern Europe, Eurasia and Africa. Click here for more.

If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Bond Market Signals Strong Recovery

Dec 23, 2009

Mike Walsten

We've been concerned the damage done to the credit markets last year would take a long time to heal and that the recovery in the U.S. economy would be slow and muted. But this story in the Wall Street Journal (December 22, 2009) suggests the bond market is telling us otherwise.

Bottomline: The yield curve (difference between short-term -- usually the 2-year T-note -- and long-term interest rates -- usually 10-year notes -- on government securities) has steepened to levels not seen since 1992 and 2003. In both of those years, the steepening yield curve signaled a strong, sustained economic recovery following a recession. In both cases, it took the Federal Reserve a year or more to respond to the growing economy by lifting interest rates.

If the market is again correct, this suggests the recovery may prove stronger than we expect but interest rates may remain restrained well into 2010, which is supportive to land values.

Click here to read the story.

If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

Iowa Land Values Decline For First Time In Decade

Dec 16, 2009

Mike Walsten

Iowa State University's annual land values survey confirmed what we've been telling LandOwner subscribers, that the correction in land values is over. The survey found land values declined just 2% as of year-end 2009 versus a year earlier, posting the first decline in land values in ten years. However, the 2% decrease follows declines of 7% to nearly 8% on an annual basis reported by surveys taken in September. The moderate annual decrease in the ISU survey reflects the strength that has entered the market since spring and gained steam this fall. ISU's Mike Duffy, who conducts the annual survey, makes the same observation in his press release. Click here to access the complete press release.

Portions of the press release follow:

AMES, Iowa -- The average value of an acre of farmland in Iowa declined in 2009 for the first time in a decade, according to an annual survey conducted by Iowa State University Extension. Mike Duffy, ISU Extension farm economist who conducts the survey, said the statewide average as of Nov. 1 this year was $4,371 an acre, down 2.2 percent or $97 from the 2008 figure of $4,468.

The last time the statewide average dropped was in 1999, when the survey reported the average was $1,781 an acre, or $20 less than in 1998. In the decade since 1999, owners of Iowa farmland have watched their holdings increase in value by 145 percent on average.

Duffy said the slight decrease in 2009 in the ISU survey may contain some good news compared to other surveys that look at land values in Iowa. He noted the 2.2 percent decline covered sales for the time period between November 2008 and November 2009. It compared with a 7.6 percent decrease reported by the Realtors Land Institute for a survey covering the period from September 2008 to March 2009, and a 7 percent decrease from October 2008 to October 2009 reported by the Seventh District of the Federal Reserve Board. The Federal Reserve Board report included an increase of 4 percent from July to October of 2009.

“The decrease in land values appears to have stopped,” Duffy said. “The situation has stabilized but for how long is unknown.”

While land values on average declined slightly in 2009, the survey reported that 14 counties showed increases. The counties with increases included several in east central Iowa where the 2008 flooding held down the gains shown in other parts of the state last year.

Duffy said the recent trends in the value of Iowa land are not surprising given the relative change in the value of crops produced in Iowa over the past few years. “The value of corn production in Iowa increased 64 percent from 2006 to 2007, but decreased 15 percent from 2007 to 2008, based on year-end summaries by the U.S. Department of Agriculture,” Duffy said. The value of the soybean crop increased 40 percent two years ago and then decreased 9 percent last year. Year-end reports are likely to show additional declines in total crop income, based on crop prices and the difficult harvest, Duffy said.

The survey also found a major decrease in the amount of land sold during the past year. The trend toward greater demand for higher quality land continued, and there also was an increase in the percentage of land being purchased by existing farmers, correlating with a decline in investor land purchases.

Of the nine crop reporting districts in the state, Northwest Iowa reported the highest average value at $5,364 per acre. The lowest average in the state was in South Central Iowa at $2,537 per acre. The only district that showed an increase over 2008 was East Central, up 1.1 percent

The highest county average in the state was Scott County at $6,361 per acre, up 0.8 percent from last year when it also was the highest. Decatur County was lowest at $1,957 per acre. Lyon County led the state with the largest dollar increase at $237 per acre, while Allamakee County had the largest percentage increase at 5.7 percent. The greatest dollar and percentage decreases were $384 and 6.6 percent, both in Black Hawk County.

Low grade land in the state averaged $2,884 per acre, a decrease of $83 or 2.8 percent over the 2008 survey. Medium grade land averaged $4,076 per acre, a $119 decrease or 2.8 percent.  High grade land averaged $5,321 per acre, a decrease of $60 or 1.1 percent.

If interested in seeing a copy of LandOwner, just drop me an email at landowner@profarmer.com or call 800-772-0023. Or click here to access the full report.

 

Strong Land Auctions Reported

Dec 14, 2009

Mike Walsten

Here's an item I ran in the current issue of LandOwner that talks about some of the surprising strong sales seen in the land market recently. That item starts below. Meanwhile, here is a press release from Schrader Real Estate & Auction Company, Inc., Columbia City, Ind., that highlights a recent strong auction near Frankfort, Indiana.

This is the story that ran in the December 10 issue of LandOwner:

Strong Sales Seen At Recent Midwest Auctions

Dynamic. Strong — for better quality ground. Variable. Surprising. Yes — because after following the constant negative downbeat of the financial and farm media, you’re surprised when you hear a east-Central Illinois farm sold for $7,800 an acre in less than 30 minutes.
These are our impressions after spending several days following recent auctions from Indiana to eastern Colorado.
Here are some examples:
•$7,500 an acre in Knox County near Galesburg in western Illinois.
•$7,675 in northwest Iowa.
•$5,000 to $6,000 at several sales in Indiana.
•$8,700 near Bushnell in western Illinois.
•$3,800 in Atchinson County, Missouri.
•$5,770 in southwest Iowa.
•$5,000 in south central Minnesota.
•$2,900, irrigated land in western Nebraska.
•$2,400 in central South Dakota.
•$5,990 in Renville County, Minnesota.
•$1,820, combination irrigated and dryland cropland in northwestern Colorado.
•$7,600 and $7,800, Coles County, Illinois.
•$3,740 in Sedgwick County in central Kansas.
•$4,590 in Brown County, Minnesota.
•$5,850 to $6,800 for several sales in Hamilton, Hancock and Humboldt counties in Iowa.
•$7,500 to $7,600, Hancock County, Illinois.
•$5,100, irrigated, Reno County, Kansas.
•$4,600-$5,800, Redwood County, Minnesota.
•$5,100-$8,100 in Holt County, Missouri.
•$6,025 in Madison County, Iowa.
We know not all sales have been this strong. There have been several “no sales” at auctions, too. In those cases, the common denominator is lower quality soils and a low percentage of tillable acres versus gross acres.

If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

 

 

Texas Land Values Steady Versus Year Ago

Dec 11, 2009

Mike Walsten

The value of Texas ranch and cropland is steady compared to a year ago, according to the most recent survey of ag bankers conducted by the Federal Reserve Bank of Dallas. The survey, covering the third quarter of 2009, indicated dryland and irrigated cropland are up slightly at 0.6% and 0.5%, respectively, versus 2008. The same survey shows ranchland is up 3% when compared to a year earlier.

The survey pegs the average value of an acre of Texas dryland cropland at $1,335 an acre, an acre of irrigated cropland at $1,320 and acre, and an acre of ranchland at $1,489 an acre.

Besides serving bankers in all of Texas, the Dallas Fed bank also serves bankers in sourthern New Mexico and northern Louisiana. When looking at the entire district served by the Dallas bank, dryland is up a slim 0.2% versus a year earlier, irigated cropland is up 0.3% and district ranchland is down 0.7%.

When comparing figures versus the previous quarter, Texas dryland cropland is down 1.1%, irrigated cropland is down 0.4% and ranchland is up 1%. On a district-wide basis, dryland cropland is off 1.4% versus the prior quarter, irrigated ground is down 0.4% while ranchland is unchanged.

The survey found 26% of all respondents expect farmland values would fall during the fourth quarter. That is an increase from the second quarter when 17% said they expected values would decline.

Please click here for the full report from the Federal Reserve Bank of Dallas..

If interested in seeing a copy of the LandOwner newsletter, just drop me an email at landowner@profarmer.com or call 800-772-0023.

 

 

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