Phipps: Big Land Sales

January 16, 2017 10:43 AM
 
 

Loyal viewer, Brad Johnson, noticed a news story and had a comment:

"On Monday, 8,638 acres of Illinois farmland changed hands for a total of $55.311 million dollars, after the dust settled between a 'battle of two entirety bidders.' In principal I do not object to such transactions.  Essentially it is a group of people doing what hundreds of thousands of us have done individually for a very long time, investing in farmland with an eye to long term total return and the pleasure of owning land. However, we nearly all have a gut level reaction to the news when we read it."

Brad, thanks for the feedback, and you are right, there is an instinctive concern about farmland slipping out of farmer control when you read about big sales like this one. But over the years, I have slowly realized they are the exception, not the rule.

We notice big sales like this because they are rare. It has historically been really hard to accumulate big chunks of prime land and even harder to keep them together. With the effective turnover rate of only about 2%, farmland is a slow and illiquid market. About twice as much changes hand each year, but between private parties or families.

So even if outside investors were going to take over the land market, it wouldn't be overnight. Also, remember that with about 900 million acres of farmland, and roughly 400 million of cropland, even a sale if this size is a tiny fraction. It has huge impact in the community where it is located, however.

It might be helpful to check the numbers on who owns America's farms. As you can see 60% is owned by the guy farming it. But even the ground owned by non-operators has a farmer component. About half of non-operator owned ground is owned by former farmers, generally old retired guys who like to drive out and bug the tenant by droning on about the old days.

The upshot is about ¾ of US farmland has to be pried out of our cold, dead fingers. And that number has been fairly stable for decades.

DSo while it may be upsetting for a big sale to be closed by a big buyer, we'd probably be just as uneasy if a big farmer bought it.

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Comments

 
Spell Check

Dave Hunt
Blandinsville, IL
1/17/2017 06:57 AM
 

  One detail of the auction that everyone failed to make note of, the farmland that sold in this case was a part of one owners land holdings (a small part as I understand). I was at the auction & I felt that the auctioneers were catering to the large buyer, but they are working for the seller & they obviously felt this was best way to get maximum value.

 
 
Doug Stien
Newhall, IA
1/17/2017 03:20 PM
 

  I hope your your right about land ownership. But I fear we are going down a similar path as my Grandmother who used to have chickens,my father who fed cattle and me who used to raise hogs. Hopefully my grandsons won't reminisce how about a time when grandpa who used to farm his own land

 
 
John
Salina, KS
1/17/2017 07:14 AM
 

  Consider Phipps is wrong? These type buyers become the rule and not the exception. I've heard numerous experts claim this is like the 80's or is another Ag downturn like so many in the past. Maybe not, low interest rates attract big investors to farming. Very different from the 80's.

 
 

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