It’s an unfortunate fact, but a sizable amount of our business is a result of death. A family member passes away and they leave their farmland to their family members, but what happens next? Some family members may want to keep the land and rent it out, while others may want to liquidate the asset and reinvest their money elsewhere. More often than not, the more decision makers involved, the more difficult it gets to agree on the “right” answer. A recent article on DTN/Progressive Farmers takeds a look at this topic (Land Bump Makes Buyouts More Challenging) and touches on some of the challenges that landowners might face. If everyone is on the same page with selling, it is just a matter of selling the farm and dividing the sale proceeds. Where it can be more difficult is if some may want to sell, while others don’t. And in the case the article describes, if one of the landowners is also the farm operator, things can get even more tricky. The truth is that there is no boiler plate formula for how to come to a fair decision amongst family members. The author offers some good suggestions, including coming to terms on exit strategies in advance to minimize the headaches when the ground is ultimately inherited.
Posts Tagged ‘value’
Dividing The Farm
Friday, May 6th, 2011More Facts on Organic Agriculture
Tuesday, June 8th, 2010In previous articles and blogs, we have discussed the growth of the organic food market. In certain parts of the country, this segment of agriculture has expanded rapidly. A recent article in Amber Waves, Organic Farmers Faces Issues and Opportunities, provides more details of the size and scope of this industry.
As can be expected, organic farming varies significantly across the different types of crops. For example, nearly 9% of all U.S. berries are produced organically, while only 0.2% of all corn is. Interestingly, the demand for certain organic products is so great that we’re now importing some of these goods to meet the needs. This is in addition to the imports of organic crops not typically grown here like tea, cocoa, and coffee.
Unfortunately, the organic industry still faces many challenges. One of the biggest at the present is the public confusion from other food labels such as “locally grown”. The two methods should complement, not compete, with each other. The locally grown label simply tells people where the product is grown, not how as in the case of organic farming.
I believe that the continued demand for organic products and the price premiums they command will ultimately lead to a price premium for land that has met the certification criteria. The market has been so small in the past that at the present almost no one (including most appraisers) knows what that premium to a non-certified farm might be. That said, I’m convinced that within 5 – 10 years there will be enough sale data to prove what we inherently know – a specialized asset will ultimately command a premium price in the market place.
European Land Values Remain Strong
Wednesday, April 7th, 2010The media, the government, and land grant universities have always done an excellent job in reporting trends in farmland values across the Midwest. And at certain times, stories about agricultural land in South America hit the news. What you don’t read about as often is how farmland is doing “across the pond”. How do the Europeans view this asset class and do investors view this as a viable investment alternative?
An interesting article I read this week in Agrimoney , Farmland Prices Hit Record High in England, addresses some of these questions. Similar to the U.S., agricultural properties there are currently at record levels (they increased 5.4% in the first quarter) and further appreciation is expected in the foreseeable future.
The reasons for this market strength are also remarkably similar to the U.S.… 1. Very few properties are available for sale (down 18% from 2009); 2. There’s an increased demand for tangible assets; and 3. There’s a fear that infighting in the government may cause problems for their currency, thus making land a more attractive investment to outsiders.
Through our farms our physically separated by the Atlantic Ocean, it appears that farmers and land investors in the two countries may have more in common than you think.
THE DEMAND FOR FARMLAND
Wednesday, February 17th, 2010While farmland buyers have always placed a premium on Class A farms, the past few years we have seen this premium become even greater. When looking at farmland value trends across a region, it is important to remember that there are many micro-markets inside these regions. While the land prices in a region may appear to be holding steady, a closer look may reveal that the poorer farms have decreased in value while the larger, more productive farms have increased in value.
A recent article in the Sioux City Journal describes just this scenario, except in Iowa instead of Illinois. The article (here) discusses some recent land sales in Iowa as well as trends in various counties. According to the author, some counties in Iowa experienced gains in values as high as 4+% in the last year, while other counties saw declines in value of more than 6%.
So when you are trying to get a handle on what this market is doing, and what your farm may be worth, it is important to look at the sales in your immediate area. That will give you a reasonably good idea of what to expect out of your property.
Do you have any thoughts on the premiums being placed on the top farms? Curious as to what farmland values are doing in your specific area? Feel free to email me at eric@loranda.com.
Source: Sioux City Journal
A LOOK AT LAND PRICES & CREDIT AS WE HEAD INTO FALL
Tuesday, September 8th, 2009The author describes that many Ag lenders are experiencing some of the same problems that other sectors of the economy are going through. According to the lenders that were polled, loan repayment rates were down and renewals and extensions rose from the same time period in 2008.
To read the entire Ag Letter article, click here.
Does the decrease in land values correspond with what you have seen at recent sales? What are crop yields expected to be in your area? Let us know at eric@loranda.com
Source: Federal Reserve Bank of Chicago
