Investing in Farmland?

[horgad]

"I have been thinking about selling it. should I sell or not ?"

If you believe that the dollar is toast, then you will be looking to invest in hard assets. (if you don't think that, why exactly are you bothering to stuff every nook and cranny of your home with old dirty pennies? )

The most obvious hard asset to flee to during a currency melt down is gold (and it will become even more obvious to more people if/when things get worse). Because it is the most obvious hard asset to flee to, gold is liable to run up well past its inflation "perfect" value. In fact this is exactly what it has done in the past. For example, if the dollar loses 50% of its value from here, gold should rightfully double. However it might very well quadruple in the rush to buy it. And of course this rush works in reverse too on the way down...which is why gold can be so darn volatile at times.

The point being that as our currency crumbles different hard assets at different time will be the best value. Some will get dangerously overpriced (ahead of inflation) and some will lag. For example, most likely in the future there will come a time where if you are bold enough you could exchange your gold for real estate and make a killing. Or for that matter, the beaten down stock of some company that is destined to survive the upheaval.

So if you are able, try to buy low and sell high, and don't forget to diversify to buffer yourself from the mistakes that we will most assuredly all make along the way.

As always IMHO.

[adagirl]

Long time lurker, but will wiegh in on this subject as I did the same thing a few years ago. I bought 40 irrigated acres in central Nebraska and paid $1500 per acre. If I were to sell it today it would easily bring $2600 to $3000 per acre. Taxes are currently around $15 per acre and is rented to a farmer for $120 an acre. My intention is to farm it myself in a few years, I am slowly accumulating smaller and older equipment. I don't think you will go wrong buying, slowly there are moritoriums being implemented on the water that will make irrigated farmgound hold and escelate in price for the foreseeable future.

Thanks for the insight. I did not know about the moritoriums being implemented on water. I have been studying the possiblity of buying farmland for about 2 years, and I don't think you can go wrong provided you do your homework. From a survival perspective, you would want a water source on your property, such as a river, creek, or stream.

[Lemon Thrower]

regarding water, if its for survival, a well will probably suffice. for timber and probably other crops, a creek or river can often reduce the value for 2 reasons. first, it often bisects the property making part of the land inaccessible. second, it means a lot of what you have is bottom land, or prone to flooding. for timber, that usually means hardwood rather than pine, and its difficult to get timber prices for hardwood. don't know about crops, but i assume the moisture means different or no crops. and i wouldn't assume that just because you are adjacent to a river that you could use all of that river water to irrigate your crops. what do you think this is, a free country?

[GA-Silver]

My little girl has a savings account that we've opened to pay for her college education. I've seriously been thinking about investing her money in property since the interest rate for savings accounts is stupid low (like .5%!!).

[Lemon Thrower]

buy her some silver or gold coins instead. my son was given a small amount of money when he was born from various relatives. we put it in a savings acount. put birthday money there too. i cashed it in for 90% earlier this year when silver was at $14. so he's up 50% in less than a year! do it, you won't regret it. also, the coverdells and 529's are more trouble than they are worth and are a nice target for the professional thieves.

[AGCoinHunter]

for timber, that usually means hardwood rather than pine, and its difficult to get timber prices for hardwood.

Hardwood timber prices for can be found. You will need to contact local mills and see what they are paying. The big thing with timber is the accessibility (well maintained roads and can be cut in rainy season) to the product that needs to be cut. Mills work on supply and demand so when supply is down in a rainy season you should be able to get a better price if you have accessible roads. Also the proximity to the mills will affect price. Transportation cost is a big factor.

[Beau]

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[quote="horgad"]"I have been thinking about selling it. should I sell or not ?"


This land is full of Hardwood and pine trees. plus there is a creek in the back.
it on a blacktop road, just turn off on the land cross the ditch and the trees start there.

my Grand Dad farmed it all his life with plenty to sell, after they canned all the family could use, now it is all grown up. it would take a lot of land clearing.

if the SHTF it would be a good place to go if you had a travel trailer, or mobil home, or planned on building a house. there are plenty if FEMA trailers here at good prices.

I don`t know if I should sell it or keep it, I don`t need the money right now.

I guess it would be good for silver or Gold if I did sell it.


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[Lemon Thrower]

its not easy to sell property like that at a good price now anyway. but if you dont need the land i would sell and then buy pm's. especially if you are not farming it. but i would encourage you to farm it like your grandfather did. i would not expect land like that to increase in value nearly to the same extent as gold. as for the trees, a timber company will clear cut it for you, but then you have to have a bull dozer to plow the slash and the stumps. most timber companies will give you a lower price for hardwood simply because there is not much demand for it as lumber, so its mostly chipped up and sent to pulp and paper mills. you still get paid, just not as much as mature pine. i mention that because bottom land next to a creek typically will have almost all hardwood and no pine.

i don't know where you are located but as a very rough ball park estimate you might ge $500-1000 acre selling the timber, and then might get 500-1500 acre for the clear cut land. the closer you are to a large population the higher demand and therefore value for the land. timber is pretty depressed right now so don't expect a lot, and timber companies don't get excited about small parcles.

[Morsecode]

Thought I'd resurrect this thread in case anyone would like to chime in with current prices in their area. Especially for timber land.

Wonder what happened to horgad? Hasn't been logged since Sept 2011

[knibloe]

Very interesting thread. I just had a conversation with my brother yesterday about going in together to buy my neighbors land. Then my neighbor stopped by today and I had a chat with him. The property is 60+ acres and adjoins my property. All of it could be tilled, except that it is very wet in the middle with only one place to drain it. That place is my property. It could be done with my cooperation. It couldn't be done w/o my cooperation. I really want to buy at least 10 acres. The trouble is that is the 10 acres that he most wants to keep (property in probate ). I was going to offer him $3000 per acre. He mentioned today that he expects that he will get at most $1500 per acre His big draw back to selling the 10 acres is he wants to keep farming it. I told him no problem, I could give him a long term lease. My wife gave me the go ahead to offer $1500 with the "we can offer more if we need to" suggestion. Gotta love her.

Some info on farming:

1. Property planted into corn will net $1000 per acre after expenses. I asume that it is the same for soy. I plant 1.5 acres of pumpkins, gourds and squash every year. We pull $2-3K out of it every year. Sweet corn will produce 1000 dozen ears of corn per acre. It would cot you about $500 to pay someine to plant it for you.
2. Where I live thre is a lot of competition for land. Rents can get up to $120 per acre.
3. Ag exemption varies a lot, but in NYS: 7 acres minimum and need to produce $10K annualy. If I rent to my neighbor, I can only exempt the exact acreage that he rents. If I am the farm, I can exempt the acreage in production and 1 additional "support" acre for every acre in production (hedge rows, woods, ponds, waste land...). This esentially double your exemption. My neighber died and I lost my exemption. It is costing me and additional $1K per year. I am working on getting my production up to $10K. You gotta do it 2 years in a row to begin with.
4. For a Timber exemption, you have to have 50 acres with a managment plan. You get a rebate on your taxes, but when you do a commercial harvest, you need to pay a part of the harvest to the taxing agencies. Again this is NY. Last I looked into it was 15 years ago.

Farming can pay. Owning farmland can pay off for several reasons over the couple of % ROI that were mentioned above. 1. Gives you the opportunity to be self suffecient if you need to. 2. Land is a finite thing. We know how much there is and they can't print more. In fact, the # of acres of good crop land is going down. Therefore, no matter what inflation does, it is going to keep pace and over the long haul is should appreciate.

[mbailey1234]

Some additional "food for thought" on this subject. Most aspects of the farming situation are currently very heavily subsidized right now. Although we are now operating without a farm bill because of obvious reasons in DC, there is still a somewhat limited risk to owning land in our area. Although I don't expect this safety net to change much in the near future, it still could. And when it does expect the line in the sand to be more obvious as far as the strong hands vs weak hands. I can just look at several of our neighbors and see huge differences. If we lose the cheap insurance programs and most of the other handouts that limit their risk, the weak, over leveraged ones are gone. But there may be just as many strong hands with deep pockets there to buy up everything? This could possibly have a huge affect on land prices.

Then let's talk interest rates. Everyone knows the fed needs to be raising interest rates (among other things) to curb off some inflation. We don't seem to think they can (or will) due to the national debt problem. But I can assure you that $10,000 per acre Iowa dirt has a limit to potential gain and if we start seeing other things showing a decent return potential it wouldn't take much for this market to stall out.

Weather has driven the markets due to widespread drought. The guys that had disasters didn't really lose anything due to the safety nets (crop insurance and disaster payments) in place but the guys that had a good crop hit it out of the park. I can assure you if the 97 million acres that were planted in 2012 would have averaged 5% above trend line yields this year, that could have stopped the land market dead in it's tracks around here. I think these guys really think they can count on $7 corn from now on..

So will they continue the safety nets creating limited risk? What about the ethanol mandate and other wasteful spending that helps support the markets?

What will the weather do? Another dry year and we may see corn at $20 per bushel??

What will interest rates do?

What are the capital gains laws going to be on down the road? This talk of a possible 55% capital gains rate on anything over 1 million scared the hell out of the locals around here. If not now, I wouldn't be a bit surprised to see that in 10- 20 years down the road. This is an important thing to think about as far as the cost of your exit strategy.

Many are calling for a correction around here in the land market. I could see that I guess but I am more concerned if the federal government doesn't change it's ways very soon that the inflation we have seen in the farm economy may just be a precursor of what's to come on the rest of the economy. (meaning excessive inflation due to a huge money supply breaking loose and limited goods....) Only time will tell on that..

[Morsecode]

I'm impressed. Two very indepth replies. I didn't know we had farming expertise on board here at realcent

I'm just a no money down know nothing looking for cheap softwood stands.

(ok, I know a little)

[mbailey1234]

Expert?

I'll tell you how much of an expert I am... I didn't have the guts do go in debt $300,000 back in 1995 to buy 240 acres of prime land with a house, finished shop and storage with it. There was another 700 acres right beside it that I could have rented to go with it.... Cash was available, just sign here..

The original 240 sold last summer for $6250 per acre! (measly 1.5 mil)

I was down at my dad's this evening and we had just had "another" long discussion about the economy and where we are heading, including land prices, so I was a little shocked to see this discussion starting back up on here... He just bought some silver from Chris S. this weekend so I guess I see where his vote is.

[knibloe]

I am not an expert either. However, I do work in the dairy industry. Around here we have three competing enterprises for land. First dairy farms. There are 100,000 milking cow and another 100,000 head of yound stock within 25 miles of my house. Land is tight enough that they wil travel 25 miles to work it. The next enterprise is corn and soy. The third enterprise is vegtable crops: peas, cabbage, beans, carrots, beets etc. $7 corn helps the cash crop guys, but hurts the dairy farms. Low corn hurts the cash croppers, but helps dairy. When one has money to invest in farm land, the other doesn't and vise versa. It isn't like other parts of the country where all they do is grow corn or soy.

I agree with mbailey, that there is risk to farmland. I am not going to morgage my house to buy the land next to me. However, my brother and I can buy it together and I can swing my part with debt, I am going to do it. It in't great land, but there are at least a dozen dairy farms that would rent it from me. Also, I have not intention of farming it on my own. I am going to farm enough to get my 10K so I get my ag exemption, but that is all. However, if I own it, I have options.

[Sheikh_yer_Bu'Tay]

This is a great thread! Thanks, knibloe, for bringing it back up!

I didn't have time to read all the comments for now. I just skimmed over most of it. It's Christmas Eve, and I still have a few presents to make and some mint jelly to work on. I will come back and read everything closely when I can.

One quick comment I would like to make:

Land here in Oklahoma ranges from the really cheap stuff @ $800 per acre (rocks & scrub oak trees on hills), to the really good stuff that starts at $5,000 per acre.

The good news about land here in Okla. is what is exempt in a bankruptcy. You can keep up to 160 acres plus the house on it. That means you could be sitting on over a million dollars in assets and still write off bad debts. Nice to know for SHTF scenarios we are always talking about.

[CLINT-THE-GREAT]

Of course the county I live in (McLean County) has what was documented as the richest soil in the world (it looks like potting soil), but per acre farmland in Central Illinois typically goes for $5000-7500 per acre. But because the soil is so rich, the yields for corn/beans is abnormally high.

-The Great

[silverflake]

For those of us who are not in a position to buy actual land, I buy the stock symbol CRESY (Brazilian farmland - pays a nice annual dividend>3%) and PCL (Plum Creek Lumber) pays about 3.5% dividend. Do your own due diligence.

[knibloe]

This is a great thread! Thanks, knibloe, for bringing it back up!

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Morsecode was the one who brought it back up. Thanks to him!

[Lemon Thrower]

also take a look at Rayonier, Potash, and Sprott. (haven't looked at them for a while, so that's not even an implied reccomendation).

[Sheikh_yer_Bu'Tay]

This is a great thread! Thanks, knibloe, for bringing it back up!

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Morsecode was the one who brought it back up. Thanks to him!

I stand corrected! Thanks to Morsecode for bringing this old thread back to life!

It has some really good info in it I will need to file away for that day when I sell off all my PM's and buy some land.

[joemac]

$1200 acre net corn? That is preposterous. $2-300 is about right for profit.

Quick math; 200 bushel/acre corn is more than most will ever put out. 125-150 is closer to normal. This year less than that. 200x7=1400. Corn is about $7 a bushel right now. Unless I'm missing something here.

There is no money in grain farming. It is not sustainable economically, environmentally, or socially.

I'm in the market farming business, as an employee currently but intend to start my own enterprise in the future.

In intensive market farming, land holdings are small and gross revenues per acre are super high. Per acre we expect $25-35K gross revenues per year. It is generally accepted that this can be sustained up to about 5 acres approx. As you get bigger you need bigger equipment. The fellow I work with has beat even these numbers on about 1 acre. The general premise is that you plant high value crops that you sell directly to the end consumer thus keeping much more of the food dollar. As soon as something is harvested it is ripped out, and a new crop is re planted. This can occur with the right setup and equipment year long.

With the right planning and the incorporation of small livestock; ie laying hens, meat chickens, pastured pork an owner and a helper or two (or his family) could expand to about 10 acres and should not have a problem achieving a PROFIT of about $5K per acre. So after expenses a $50K profit on 10 acres. This type of sustainable market farming is good for the wallet, environment, and community.

So, as someone in the industry see it who is trying desperately to buy farmland;

1. Smaller acreage-maybe 5-10, with a home in an area within an hour of a major metropolitan area should be an easy lease to someone like me. Young farmers are out there but there funds are limited, but their dreams are not. Buy low and rent fair market. We need a long term lease and permission to build outbuildings and infrastructure.

2. Is it the best decision to buy anything at all time highs?

3. The margins in conventional monocropping are continuing to be squeezed. As margins shrink, I might guess that rents will have downward pressure. Even though grain prices have upward pressure, they are easily substituted. There is a large social push to healthier and more local food. I expect this to continue and escalate in the future. Also equipment and fuel are continuing to rise again squeezing large farmers. It's a money loosing proposition and not sustainable without cheap oil and government subsidies.

4. Buyer beware. If you want to invest in agriculture I would find knowledgeable people who you can partner with or lease to. These would be grass farmers and sustainable market farmers. There is no profit anywhere else.

[shinnosuke]

$1200 acre net corn? That is preposterous. $2-300 is about right for profit.

Quick math; 200 bushel/acre corn is more than most will ever put out. 125-150 is closer to normal. This year less than that. 200x7=1400. Corn is about $7 a bushel right now. Unless I'm missing something here.

There is no money in grain farming. It is not sustainable economically, environmentally, or socially.

I'm in the market farming business, as an employee currently but intend to start my own enterprise in the future.

In intensive market farming, land holdings are small and gross revenues per acre are super high. Per acre we expect $25-35K gross revenues per year. It is generally accepted that this can be sustained up to about 5 acres approx. As you get bigger you need bigger equipment. The fellow I work with has beat even these numbers on about 1 acre. The general premise is that you plant high value crops that you sell directly to the end consumer thus keeping much more of the food dollar. As soon as something is harvested it is ripped out, and a new crop is re planted. This can occur with the right setup and equipment year long.

With the right planning and the incorporation of small livestock; ie laying hens, meat chickens, pastured pork an owner and a helper or two (or his family) could expand to about 10 acres and should not have a problem achieving a PROFIT of about $5K per acre. So after expenses a $50K profit on 10 acres. This type of sustainable market farming is good for the wallet, environment, and community.

So, as someone in the industry see it who is trying desperately to buy farmland;

1. Smaller acreage-maybe 5-10, with a home in an area within an hour of a major metropolitan area should be an easy lease to someone like me. Young farmers are out there but there funds are limited, but their dreams are not. Buy low and rent fair market. We need a long term lease and permission to build outbuildings and infrastructure.

2. Is it the best decision to buy anything at all time highs?

3. The margins in conventional monocropping are continuing to be squeezed. As margins shrink, I might guess that rents will have downward pressure. Even though grain prices have upward pressure, they are easily substituted. There is a large social push to healthier and more local food. I expect this to continue and escalate in the future. Also equipment and fuel are continuing to rise again squeezing large farmers. It's a money loosing proposition and not sustainable without cheap oil and government subsidies.

4. Buyer beware. If you want to invest in agriculture I would find knowledgeable people who you can partner with or lease to. These would be grass farmers and sustainable market farmers. There is no profit anywhere else.

PM sent.

[mbailey1234]

I am very interested in seeing a scenario where you can gross $30k or more per acre on a 5 acre tract of land. Where are you located? Must be down south somewhere where the season is much longer than around here? How labor intensive is what you are talking about? It wouldn't take much to eat up that revenue in labor costs? Don't get me wrong, I'm not doubting but rather I am very intrigued... Thought about PMing but figured there were others that may be interested as well.

As far as the debate of $1000 acre net on corn... I say this is possible and several farmers in NW Iowa will actually achieve this with the 2012 crop. 200 bushel + yields @ $8.50 gross has a lot of potential... However, as a long term average, absolutely not. I would agree more with the (possibility of) $200-$300 which I believe would still be above average.

I still think the land prices will stay strong as long as the safety nets are left in place and interest stays very low. In the event we lose either one or both, that is when there could be a huge reality check. The investor money is only going into land because there isn't much else out there that will give them that kind of return (at the moment anyway.) Who knows how long this will last though?????

[knibloe]

Many of the dairymen that I work with say that they will net $1000/acre on corn and they started saying that in 2008. I am not going to back down from that.

In NY if you have less than 7 acres of land, you can still get an Ag exemption if you produce $50K in farm products. That is $7k+ per acre. Joemac is right, it is possible, but it takes effort, it takes the right crops and it takes marketing. I have a 1 to 1.5 acre pumpkin patch (pumpkins, gourds, squash, indian corn). Mine are all single crops per year. Joemac was talking about multiple crops per year which will work with some situations. The best year I had we sold $3500 worth of pumpkins. We netted about $2800. I probably put in about 100 hours this year. A lot of time could be shaved off if I paid someone to prep the soil for me or if I had a larger tractor. If I did the same thing on a 5 acre scale, the hours per acre would decrease quite a bit. That said, I have never had a "good" crop. My soil isn't the best. My full time job prevents me from tending them like I should. This year I lost half my crop to weeds because I was camping with my son when they needed sprayed. We also fail to market all that we produce if I could put more time into this we would do better as well. I estimate that we could easily reach $5k per acre if I did it right. My ultimate goal would be to produce. Small scale vegtable farming can be profitable.

Christmas trees
1000 per acre. 10 year turn over -= 100 trees per year = $3500 gross
1500 per acre 7 year turn over = 200 per year = $7000 gross

[joemac]

I'm not sure y'all are clear on gross and net. Gross=revenue you collect BEFORE any expenses or taxes. Net=PROFIT, sometimes before interest, taxes and sometimes after.

200x8.5=$1700. They are not making a 50% margin I assure you. Not if they figure in their true cost including their own labor, depreciating equipment and land costs.

As for intensive market farming, there are people even in the Northern states working the shoulders of the season with season extension equipment. It is possible to farm almost year 'round, even as far north as New England.

In market farming the 30k and acre is before labor, but 50% gross margins (or 15k profit) is attainable if you manage it correctly. I never said it was easy, in fact it is hard. But, if you want to make money in farming this is what you have to do. When trying to make money in anything, emulate the profitable people in the industry. This is a real cent forum and we are talking about doing things the way that the masses do. Using 500K combines that eat up $5 gallon diesel fuel to make $1500 an acre gross for a product that is subsidized by the government is not the way of the future.

Without this devolving into a sustainable vs conventional farming argument, which I do not want it to my point is that buying farmland is not a sure thing. It is at all time highs and you should know what you are getting in to.