Our recent trek out west gave us a firsthand look at some great crops and the challenges many fellow farmers toward the west are facing. Fortunately, for most of the cornbelt (especially the eastern half) we are experiencing positive gains on all fronts. At the same time many farmers in the west are faced with drought, record heat, and related challenges.
The August 2021 Purdue Ag Economics Report has been released and we have pulled out some highlights to discuss.
Farmland Prices are increasing:
- Supply is limited; There is very little farmland for sale.
- Crop prices remain strong due to weather/supply issues and record demand.
- Farmer Profitability is increasing.
- Interest Rates are at records lows.
From 2020 to 2021, top quality farmland prices increased by 14.1%. Average and poor-quality farmland increased by 12.5% and 12.1% respectively.
In turn, cash rent prices have increased in 2021 as well. From 2020 to 2021 cash rent prices in Indiana increased on average 3.9% or $10/acre for top quality land and 4.6% (also ~$10/acre) for average and poor-quality land.
As you think of these numbers in ratio terms, it is interesting to note that farmland over time continues to trade a higher multiple of land price to cash rent as shown here:
Thinking of Buying?
Interest rates remain historically low which means traditional “safe” investments such as treasuries or bonds can pale in comparison to owning farmland for many investors.
Compared to treasury yields and bonds, farmland has outperformed by 34% over a 40-year period and by an astounding 281% over the last ten years. This is significant for what many would consider comparable risk.
It has never been more important than today to engage the services of an experienced farm specialist who knows where the opportunities are. Farming and farm real estate have been in our DNA for generations. We can help you buy and manage what promises to be a worthwhile investment.
In summary, if you have any thoughts of selling farmland, because of tax implications and current price appreciation, it may be a great time! On the other hand, if you’ve got cash to put to work, farmland continues to be a great long-term investment when compared to alternative investments.
We get asked often about proposed tax law changes and how those might affect our business. The future of tax policy is uncertain, it’s safe to say that it will likely not get lower. Multiple factors such as capital gains rates, estate taxes and stepped-up basis treatment are all a good influence in farmland. If a sale or generational transfer is on the horizon these are factors to consider!
Welcome, Stephany! We are pleased to welcome Stephany Hageman Jackson to our team as our marketing specialist. Stephany graduated from Purdue University where she majored in Retail Management with an emphasis in marketing. Her expertise in Social Media and her love of farming will serve all of us well. Stephany has strong agricultural roots and has remained directly connected to agriculture on a variety of levels including involvement with her husband’s farm in Central Indiana. Stephany and her husband have 2 wonderful children and we are grateful for her joining our team.
Please let us know if you would like to receive our new farm listings and what counties of interest you specifically have so we can help you and your farmland goals.