Buying Farmland

[imoldernu]

My friend Bill was trying to help me. I shoulda listened. He told me five years ago. He bought back in 1943, for few hundred dollars an acre, and started with 3 acres, and bought more every year. I don't know how many acres he owns now, but it's somewhere between 1,000 and 2,000. Asking a farmer how many acres, is like asking a cattleman how many head of steer he owns... or, like how much money do you have.

Farmland value, depends on the potential productivity of the land. Good soil, average annual rainfall, and clima-zone determines the value. (CSR)Corn Suitability Rating. Fifty miles can make a big difference.

This NYT article covers the most recent boom in farmland values.

http://www.nytimes.com/2012/10/23/us/across-corn-belt-farmland-prices-keep-soaring.html?partner=MYWAY&ei=5065&_r=0

Now, that's the article about the boom... Here's an article from earlier this year, that shows historical charts on farmland value, and asked the question about a "bubble" in the prices.
Crazy Question “Are We in a Farmland Real Estate Bubble?” | Dollars And Dirt Iowa Farmland Values at Auction

Any expertise here on farmland prices?

 

[MasterBlaster]

Any expertise here on farmland prices?

I am certainly not an expert, But as always you are entitled to my opinion.

It seems to me that farm prices have benefited recently from the convergence of the Ethanol boom, the commodity price boom, and very low (incredibly low) interest rates.

In my opinion all three of those factors will someday all disappear (who knows when though) and farm prices will reflect that trend at that time.

I would bet that some number of years out that farm prices will be much lower.

But what do I know, I'm just one of them thar city slickers.

 

[csgraff]

Well, I live on a farm in Oklahoma. We bought this place in 1999 for about $400/acre. The price of land had hardly risen at all in over 20 years. The values have roughly tripled in the last 10-12 years. Glad we bought when we did, but regret not trying to jump on more.

I know for several years big investors have been buying up farmland in the midwest, where prices have just gone nuts. Now some people from the midwest are buying up land here, as it is still somewhat affordable, yet not nearly as good for farming. This is mostly cattle country, unless you can afford to irrigate. Also hotter than blazes in the summer.

I know a local real estate guy who says he doesn't see how it can keep going up like this. Some of it resembles a bubble to me, particularly the Iowa area.

 

[haha]

Buying farmland today one is arriving late to the party. Might be fine, might not.
In general it is better to find your ideas off the beaten path. Also, the transaction costs and information asymmetries in this sort of real estate can be very large. If you are able to buy a farm, why aren't local farmers who have great efficiencies and information gained over a lifetime of farming in that same area buying it first? It is hard to find people more shrewd than farmers.


Ha

 

[Ed_The_Gypsy]

OP, you've got to be kidding.

Go buy another boat. It is cheaper and you will have more fun.

 

[Avalon]

Heh, 2 days ago I tried to buy a few acres from an adjoining neighbor in Iowa to straighten up a field. Not only did he not want to sell his roughly 9 acres, he was trying to buy my 40 acre adjoining plot. So, we still have a dog leg boundary line across one of the fields.

I'd suggest looking carefully at what a piece of ground yields when thinking of buying. I believe CSR is an Iowa only thing, but you can still use this site to plot a piece out and get a rough idea of what an average yield you might expect. Surety Customized Online Mapping with FSA Maps

We plant a 50/50 of corn/soy beans, and grossed about $725/acre this year with beans doing the heavy lifting. Our CSR varies between 60 and 70.

 

[frank]

at 725. per acre how do you pay for 14k an acre farmland? I know that iowa farms are not 100 percent tillable, so how does it work out.

 

[Avalon]

at 725. per acre how do you pay for 14k an acre farmland? I know that iowa farms are not 100 percent tillable, so how does it work out.

It doesn't. At least for me at 14K. Nothing in my area that I know of going for that much.

 

[Independent]

This ....

... Also, the transaction costs and information asymmetries in this sort of real estate can be very large. If you are able to buy a farm, why aren't local farmers who have great efficiencies and information gained over a lifetime of farming in that same area buying it first? It is hard to find people more shrewd than farmers.

Unless you know more about the farmland than the local farmers, you probably aren't going to get any great deals.

 

[haha]

This ....



Unless you know more about the farmland than the local farmers, you probably aren't going to get any great deals.

That is my point. And how is an investment buyer going to know more about the local land than a guy who has been going to same elevator with the seller for 30 years?

Ha

 

[rbmrtn]

This ....



Unless you know more about the farmland than the local farmers, you probably aren't going to get any great deals.

Yea, remember this guy, Dennis Hastert

Former Hastert sale property remains farmland years later - The Naperville Sun

 

[goodoldrebel8]

Heh, 2 days ago I tried to buy a few acres from an adjoining neighbor in Iowa to straighten up a field. Not only did he not want to sell his roughly 9 acres, he was trying to buy my 40 acre adjoining plot. So, we still have a dog leg boundary line across one of the fields.

I'd suggest looking carefully at what a piece of ground yields when thinking of buying. I believe CSR is an Iowa only thing, but you can still use this site to plot a piece out and get a rough idea of what an average yield you might expect. Surety Customized Online Mapping with FSA Maps

We plant a 50/50 of corn/soy beans, and grossed about $725/acre this year with beans doing the heavy lifting. Our CSR varies between 60 and 70.

Very informative information. What does CSR stand for? Yes, I am just a layman who is interested in farming and seeing if its financially feasible anywhere for a retiree who wants to explore the possibilities. Farming is certainly more productive and goal oriented than aimlessly chasing a little white ball around everyday of retirement. lol

 

[Avalon]

What does CSR stand for?

CSR (corn suitability rating) is Iowa's version of rating soils for productivity.

Several other states have developed their own productivity indices explained here.
Soil Survey Report - Iowa CSR, Illinois Bulletin 811, Crop Productivity

 

[kyounge1956]

You can look up your USDA soil type here. Click the green "Start WSS" button to begin. I just looked up my new house and it's rated as prime farmland if irrigated, so I should be able to have a very good garden. Woohoo!

 

[goodoldrebel8]

CSR (corn suitability rating) is Iowa's version of rating soils for productivity.

Several other states have developed their own productivity indices explained here.
Soil Survey Report - Iowa CSR, Illinois Bulletin 811, Crop Productivity

Thanks a lot for the information. CSR is such a useful piece of information and really is the starting point for any farm acreage purchase. You have given me a way to start, yet how does one know what's been extracted nutritionally speaking from the soil in the past. Can you not purchase prime CSR land and yet have nutritionally eroded soil from prior activities therefore rendering the land productively useless?

 

[Avalon]

Thanks a lot for the information. CSR is such a useful piece of information and really is the starting point for any farm acreage purchase. You have given me a way to start, yet how does one know what's been extracted nutritionally speaking from the soil in the past. Can you not purchase prime CSR land and yet have nutritionally eroded soil from prior activities therefore rendering the land productively useless?

This may help answer your question.
Understanding Iowa Corn Suitability Ratings (CSR) - File C2-86 Hofstrand

However, corn yields themselves are not adequate to measure productivity. Crop yields change from year to year due to local weather and other conditions. They also change over time due to new and improved crop varieties, changes in tillage methods, improvements in artificial drainage techniques, improved fertilization and other technological changes. CSR is based on the inherent productivity of the soil, making it relatively constant over time.

The CSR assumes:

• Adequate management – Variations in the management ability of the farm operator will impact the row-crop yields in a field. To adequately assess the variations in productivity across a wide range of soil types, the same level of management ability must be assumed across the entire tract.
• Natural weather conditions (no irrigation) – Although changing weather conditions will impact yields in the short-term, the CSRs were computed assuming average weather over a long time period.
• Artificial drainage where required – The CSR of a poorly drained or very poorly drained soil that does not have adequate drainage is approximately one-half of the CSR of the soil when it is adequately drained.
• Soils lower on the landscape are not affected by frequent floods.
• No land leveling or terracing.

 

[kyounge1956]

This may help answer your question.
Understanding Iowa Corn Suitability Ratings (CSR) - File C2-86 Hofstrand(snip)

Interesting. I have a hard copy of the USDA soil report for the county I was planning to move to and several adjoining ones (but not the county I actually bought a house in). The soils there, in coastal Washington, are rated by their ability to grow timber rather than corn.

 

[HFWR]

CSR (corn suitability rating) is Iowa's version of rating soils for productivity.

Several other states have developed their own productivity indices explained here.
Soil Survey Report - Iowa CSR, Illinois Bulletin 811, Crop Productivity

Cannabis suitability rating...

 

[goodoldrebel8]

This may help answer your question.
Understanding Iowa Corn Suitability Ratings (CSR) - File C2-86 Hofstrand

However, corn yields themselves are not adequate to measure productivity. Crop yields change from year to year due to local weather and other conditions,

Again, so many thanks for the external link to that Iowa state university study. It seems though that one has to be initially wealthy to buy enough good CSR acreage in order to have a materially profitable farm.

Looks like 500-1000 acre minimum is needed to generate a profit (let's say from corn and soybean) of $100k-$200k? Am I in the general ballpark about this presumption (about $200/acre profit for corn-I don't know the average profit for soybeans/acre.)? Its hard to get consistent financial information on the profit/acre for corn. A lot of variation .

My background is in Accounting so naturally I want to look at things from a cost accounting (managerial) perspective. I've been very interested in farming as both an occupation and life style yet I probably lack the courage to take the plunge without really dotting the i's and crossing the t's about what I'm getting into as I want to be realistic about the results.

 

[foxfirev5]

Your basically investing in farming. I moved to Illinois in the '80's with a farm related business. The farmers were in pretty dire straits after a big run up in both corn/soybean prices and land values. Lots of them went out on a limb and bought more land. Then out of nowhere prices dropped. Corn went from something like $6 /bushel to $1.6. The leveraged land purchases blew up. Next thing we had the first Farm Aid concert to save the family farm. There are big gambles if you want to go into this business. Feels like the end of another cycle to me.

 

[goodoldrebel8]

Your basically investing in farming. I moved to Illinois in the '80's with a farm related business. The farmers were in pretty dire straits after a big run up in both corn/soybean prices and land values. Lots of them went out on a limb and bought more land. Then out of nowhere prices dropped. Corn went from something like $6 /bushel to $1.6. The leveraged land purchases blew up. Next thing we had the first Farm Aid concert to save the family farm. There are big gambles if you want to go into this business. Feels like the end of another cycle to me.

Thanks for the straight talk and realism about farming. Being professionally skeptical is the right approach. It's a shame that farmers have to constantly have anxiety over issues that they cannot control (like the commodities index prices). I think that farmers are the very basis of what America is and most other economies transcend from agriculture.