While the U.S. economy continues to struggle, farmland is offering a sound investment option for large corporations, individual investors and pension funds. Murray Wise, CEO of Murray Wise Associates and founder of the Westchester Group, says the number of funds in the market are so far limited to about 10, but more are on the way. "There’s probably 20, 30 or 40 maybe, I really have no idea frankly, that would like to pursue it.
"Funds coming in are primarily coming, at least in the Midwest, into Illinois, Indiana and Ohio because they are the non-corporate restrictive states. There is more interest in land from a fund point of view than there has been at any point in history without a doubt. There’s just a lot of fund activity today trying to figure out how to get their arms around this asset class and become a player in it."
Wise acknowledges that many farmers may not like this change in the land market. However, he says the funds are not the ones driving changes in the U.S. farmland market because farmers are looking to expand and they are the one’s driving the current farmland market.
Market analyst Scott Stewart of Stewart Peterson says funds and large corporations entering the market is changing how farmers need to think about marketing their production. "I believe in the years ahead farmers need to manage the opportunity, manage the profitability to the extreme. Try to squeeze every penny off of every bushel and all the profits they can. They’re going to need to compete to buy the land and rent the land."
To hear the interview with Scott Stewart, click here.
To hear the interview with Murray Wise, click here.
While current commodity prices look bright for grain producers, these are the times that farmers need to be thinking about managing for leaner market conditions. "They have to expect to try to get everything they can out of the market so they can build their financial statements to get through the bad times. In the future it may not be about just to protect against the bad times, it may to protect against the big corporations and foreigners from coming in and buying farm ground out from under you."
While this move of large funds and corporation moving into farm country may not sit well with some farmers, it also could provide expansion opportunity for some to secure large tracts of land to cash rent, Wise says.
Most funds, Wise says, have an asset advisor like Murray Wise Associates or a farm management company. These are the groups he suggests to contact if a farmer is interested in arranging a lease agreement with a fund.