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Africa Tour – Part 2 – Peanut Processing and Water Table Farms

Click here to read Part 1.

On the second morning, after great accommodations on the game farm, we rose to the sounds of all sorts of wildlife on the lake. It is a hunting area so the animals are wary and keep their distance. Only long telephoto lenses allowed us to get detail of the many antelope, zebra and other species that kept themselves at least 300 yards away from us. The ducks, storks and other water birds were a delight to Koos, who began naming them by their color patterns and sounds.

Koos DeKlerk, an area-farm manager, with EmVest's Susan Payne and Gerhard Dreyer, a Southern Africa farmer.

We have rented a seven passenger Volkswagen van that is right hand drive with a five speed stick shift on the left hand. Maurice Clark was game to drive it, on the left side of the road. His skill is only exceeded by his determination and he kept us safe as we drove on the left and passed on the right.

In the town of Mafikeng is a peanut processing facility called “New Nut Company” owned by Gerhard Dreyer who goes by “Herric.” He again greeted us warmly, but informed us that we were in his business that has sanitary standards so that it qualifies to ship peanuts to the European Union (EU). After signing releases and donning white coats and white hairnets, which Koos and I really didn’t need, we were led through the plant from the scale to storage to unloading to processing.

The plant employs about 80 workers compared to 400 when Herric bought it. He explains that he has put in automation in some areas where human capabilities are far less than the sorting and grading equipment he has installed. We followed the nuts along a conveyor belt from unloading the raw unshelled peanuts to the final bagging for shipment. 

New Nut Company keeps all farmer shipments separate. The final bags are identify preserved so trace-back can be all the way to the original grower. This requires only one lot to be handled at a time. The peanuts are mechanically shelled and dumped on high speed sorters that put them in three categories that I will call whole unblemished, variable and immature. The best go for the highest rate and the machines and employees on the line pick through to remove any that don’t meet top standards.

They are weighed and bagged before being moved to warehouses for shipment. The cracked mature peanuts are made into peanut butter and have the same quality as the other grade, but don’t have the uniformity and size. The peanut plant will continue to bloom all season and some nuts are small and immature but they still have some value as oil and other low quality uses. 

I was impressed by the sanitary handling of the nuts through the process. Many of the systems were identical to those in the United States as South Africa shows capability to compete in the world market. Europe has had a long tradition of buying food from African nations so it is not a new market to sell into the EU.

We had a few minutes to use Internet in Herric’s office and we were off to see his cattle and fields. At mid-day in October it felt like late spring. The sun was hot and the land was popcorn dry. Cattle were in good condition. Most carried some “ear” as they were Brahma cross. Herric had a herd that was all European breeds with a beautiful Charolias bull and cows that were big framed and may have been Simmental but appeared to be a two way cross.

We noticed that there were many people in the corn fields picking up ears and putting them in sacks.  He allows his employees and families to “glean” the fields as there is a significant amount of grain that is lost.  The reason, he said, was because they move their maize directly into bag storage at about 12.5 percent moisture (much dryer than Midwest harvest). The corn gathered by the workers is shelled and ground into meal. Twenty percent is given back to them as meal suitable for porridge.

He had dug a hole with a back hoe especially to make a point about the farms he owns. The soil is coarse and mostly sand.  It is light red but looks bright red when it blows. Even though the top 18 inches was powder dry it progressively became wetter as one looked down and saw roots of last year’s crop exposed at the six foot level. At the bottom of the hole was standing water. That is very important as not every farm has “water table” fields that have a source of water under them.

He will rip and till the soil about 18-inches deep and then plant corn (maize) at standard depth. Since it is already getting to 90 degrees during the day, it will sprout quickly and he will fertilize often with small amounts.

In about four months, he will harvest and expects seven tons per hectare. Converted to our measurement, that will be about 112 bushels of white corn per acre. He promises video to show the progress and the result of the harvest.

-Ken Root

Ken Root is filing reports this week from Southern Africa, where it is early spring and – as part of an expedition that is being underwritten by Peoples Company – the veteran ag broadcaster along with photographer Michael McClean and investment analyst Maurice Clark are taking a close look at agricultural potential in three countries: South Africa, Mozambique and Zambia. The U.S. team including of Root, McClean and Clark, arrived in Johannesburg, South Africa, on the evening of Sunday, October 5, following a 16-hour flight from Atlanta. Monday morning, following a 10-hour flight from London, they were joined by Koos DeKlerk, an area-farm manager, and Susan Payne, executive chairman of EmVest.

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Africa Tour – Part 1 – First Impressions of Southern Africa Agriculture

Ken Root is filing reports this week from Southern Africa, where it is early spring and – as part of an expedition that is being underwritten by Peoples Company – the veteran ag broadcaster along with photographer Michael McClean and investment analyst Maurice Clark are taking a close look at agricultural potential in three countries: South Africa, Mozambique and Zambia. The U.S. team including of Root, McClean and Clark, arrived in Johannesburg, South Africa, on the evening of Sunday, October 5, following a 16-hour flight from Atlanta. Monday morning, following a 10-hour flight from London, they were joined by Koos DeKlerk, an area-farm manager, and Susan Payne, executive chairman of EmVest.

First Impressions

The climate of South Africa is almost a mirror image of Southern California. The season is opposite so springtime is coming quickly with daytime temperatures above 90 degrees. Nights are cool in the dry air with temperatures dropping down to 45 to 50 degrees. The climate is dry with an average rainfall of 15 inches. At this season, it is showing the lack of moisture with several burned areas and red dust pluming behind any tillage equipment.

Tractor on an African maize, or corn, farm

A tractor sits on corn, or maize, farm in South Africa. Photo by Michael McClean.

We spent half of the first day journeying to a farm in the Mafikeng, which is in the Northwest Province of South Africa. Most of the land is unpopulated with vast reaches of almost treeless land in an arid environment. The corn fields were harvested months ago, and standing stalks are tobacco brown. Most have blooming weeds in between the rows as farmers are very conscious of wind erosion, and want to hold the sandy soil in place until the rains come and they can begin tillage for the new crop.

Corn is called “maize” here, and the remnants of the crop we have seen are white long kernels that are flint dry. The crop is planted in late October, and harvested in March. Rows are spaced about 36 inches apart, and the land is ripped about two-and-a-half feet deep then disked before planting. Reasons for those operations will become more apparent in later entries.

Everything is on the metric system so farmers talk of hectares (2.47 acres) and tonnes (2,200 pounds). They also talk of rainfall in millimeters (about 500 per year is 19.7 inches). I will attempt to “Americanize” the numbers for easier uptake.

Susan and Koos (pronounced “Kours” like the beer) have had farming interests here and are very familiar with the region and the farmers. They introduced us to Gearhart Dreyer, who goes by “Herric” and owns several thousand acres along with his brother. He has main financial interests, including row crops on extensive acreage, a game farm, and peanut processing. Peanuts are a native crop in Africa and are called “ground nuts.”

We were graciously welcomed to his home that sits in the midst of a windbreak and among very tall trees. His large and friendly dogs welcomed us, as well, and he showed Susan his newest member of the family; a miniature stallion for his daughter. The Great Dane was larger than the horse!

Maurice Clark, Susan Payne and Koos DeKlerk tour a grain bag storage facility in South Africa. October 2014. Photo by Michael McClean.

We drove to a grain storage facility that surprised me. It is a commercial venture with all the grain stored on the ground in heavy white plastic sausages. The land is graded to allow the bags to be on the ridges. The manager “Enrico” was very accommodating to show us how the grain was received, then moved to bags, stored and later unloaded from the bags, and hauled out by truck. He rides a 4 wheeler to get through the sandy soil and inspect the work across the almost half mile stretch. Each bag is approximately 150 feet long. The filling equipment is the same at that used in the United States, but on a much larger scale. Dry weather helps to keep it in condition, and all must be 12.5 percent moisture, or lower, to be accepted.

That is not hard in this environment. The corn is white food grade corn that is mostly exported north, and ground to be used as a staple food.

In view of the bag-storage facility is a grain silo system that apparently has not fared well. Herric says his cost is 25 rand per ton for the full turn of loading in and out. That figures out to only a few cents per bushel so the key is using the climate to your advantage, bringing in low cost technology and adding an economy of scale.

South African farmers are innovative to say the least.

Herric talked about his cropping system and took us to a game farm that sits next to one he owns. The scenery was strikingly beautiful as we arrived just as the sun was setting and we could see hundreds of waterfowl on the shallow lake with many types of antelope and wildebeest grazing in the predator free fenced preserve. Koos pointed out two light colored rhino on the far side of the water.

Darkness came quickly and we settled down to hear about the region as we were treated to “biltong,” which is a meat similar to jerky. He later cooked chicken and beef with coals from an open fire. The cool air quickly made the fire inviting and we enjoyed some South African wines to cap off the evening.

- Ken Root

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Big Picture: The Climate of Land Ownership and Appreciation in the Time of Declining Cash Rents

The present climate of declining grain markets is an opportunity to refocus our attention on the most important aspect of the total return to ownership, and land value appreciation. Investors should balance their desire for an annual cash return with land improvements that will maximize returns over the long-term.

A productive farm with a conservation system in place and adequate tile drainage along with documented fertility and yield histories will not only command a top-dollar rental rate in a management plan, but also support a premium price when it is time to sell.

Iowa CornThese are some of the critical areas we recommend for consideration to increase land appreciation:

  • Benchmark measurements are critical to measure improvements developed in a well-informed, farm-specific management plan. Soil testing on a three- to four-year cycle, and collecting annual fertilizer application records from the farm operator, is the starting point for documenting soil fertility and productivity.
  • The agriculture industry is only beginning to scratch the surface of technology that will allow us to better capture and analyze data. We continue to work with companies creating new tools that help us better make well-informed management changes and keep the most productive soil in the fields available for the crops. This data, especially if the farm is improved, will become incredibly valuable for future reference.
  • The Iowa Nutrient Reduction Strategy has introduced new discussions of tillage systems, nutrient application timing, and the incorporation of cover crops and prairie strips into farm plans. Along with reducing nitrate and phosphorus in our water systems, these practices keep the money spent on increasingly expensive chemical inputs in the fi eld where the crops can use them to improve yield. Many of the practices outlined in the strategy also improve soil health by reducing soil erosion and holding the productive soil in the field while increasing organic matter.
  • Farm profitability may be improved by removing environmentally sensitive acres – and likely lower yielding acres – from production and enrolling in permanent conservation programs, such as Conservation Reserve Program (CRP) through the NRCS office. Higher rent can be achieved by renting only the high-producing acres, and the landowner can receive payments through CRP for the enrolled acres.
  • Increasing yields through additional tile drainage continues to provide excellent returns to landowners. The Ag Water Management Research Group out of Iowa State University is working to create systems to manage tile water leaving the field to reduce nutrients entering our water systems.
  • Landowners over the past several years have enjoyed an extended period of increasing cash returns. Yet, due to recently declining grain prices, there have been an unusually high number of tenants terminating their leases this summer or asking to negotiate lower cash rents for 2015.

So what practices are the innovators using to maximize yields? When it comes to increasing land appreciation, as well as collecting premium rental rates through conservation practices and data analysis, landowners cannot take a passive role.

Peoples Company continues to follow researchers and projects working to take corn-and-soybean yields to a new plateau. The smart money is on working with professional land managers to create a management and business plan that provides optimal benefit for both the landowner and farm operator in the short-term and long run.

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The Tide is Turning

During the past decade, profits of Midwest row crop farmers have grown to an unprecedented level. Farmers have used these profits to expand their businesses, invest in equipment and new technologies, and aggressively acquire farmland.

Long view of farmlandIn 2005, farmer-buyers acquired approximately 55 percent of the Iowa farmland transactions while investors purchased 40 percent. Through aggressive farmer bidding, the farmer-investor deal ratio now stands at 80:15.

Other Midwestern states have seen similar tends. During this same time, farmland emerged as an attractive investment class due to many positive fundamentals, yet only a fraction of investor demand has been met due to aggressive farmer buying.

The tide is turning and the investor’s share will now trend back up. Farmers are becoming more cautious, lack of profits and shrinking working capital are concerning, farmland prices have leveled off and, in some areas, have declined.

Investor interest and demand, from both individuals and institutions, is at levels higher than we’ve ever experienced. During the past five years, long-time investors have been joined by a wide range of investment funds, partnerships, REITs, family offices, and high-net-worth individuals.

Each are expressing their target geography, deal size, return targets, lease preferences and other parameters for their queue of money ranging from tens of millions to billions of dollars. Smaller players, without the extensive due diligence checklists and narrower parameters of the large institutions, are more regularly executing on deals.

Also, the individual investors and those structured that meet the non-corporation definitions of Iowa, Minnesota and several other states have the advantage of investing in any state while the large institutional money is on the outside looking at these key agricultural states.

As farmer buying pulls back which investors will be stepping in and at what levels? As Warren Buffet says, “Only when the tide goes out do you discover who’s been swimming naked.”

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Land Investment Monthly – September 2014

The Land Investment Monthly is a round-up of articles and headlines published by the farm press, business media and financial publications with insights into buying, selling or investing in farmland, recreational ground or development ground. Follow Steve Bruere @SBruere on Twitter and find Peoples Company on Facebook for the latest land listings, auction results, upcoming events and real estate news. Subscribe to my monthly updates or request access to a hard copy of my Land Investor newsletter by sending an email to Steve@PeoplesCompany.com and including “Land Investment Monthly” in the subject line.

Ripe Midwest Cornfield

Iowa Values
The Iowa Chapter of REALTORS® Land Institute has announced the results of the 2014 Land Trends and Values Survey, in which farmland specialists and others are asked to share opinions regarding the current status Iowa farmland market. Cropland values decreased by a statewide average of 3.4 percent for the March 2014 to September 2014 period, and according to the surveys the statewide average is down 8.8 percent on a year-over-year basis from September 2013. Estimates are for bare, unimproved land with a sale price on a cash basis.
Read more.

Land Web
The www.LandInvestmentExpo.com website has been updated with a new theme and fresh content that is reflective of the upcoming Eighth Annual event to be presented by Peoples Company in West Des Moines. The Expo, scheduled for January 23, will feature keynote speaker Dennis Gartman of The Gartmann Letter, as well as the return of both Simon Atkins, a climate Economist and Commodity Yield Expert, and reappearance of Susan Payne, an executive with Emvest Agricultural Corp. in Africa. Eric O’Keefe, editor of The Land Report, will also share a keynote presentation in 2015. Registration is open. Save the date and explore the new website today.
Read more.

Excess Cash
There is a ton of money out there, land is an inflation hedge, balance sheets are strong, and things are different than the 1980s. These are some of the points that are made when the topic of land values are discussed today. With the prospect of selling corn for less than $3/bushel out of the field this fall, the coffee shop conversations have turned from record high land sales or staggering cash rents to the discussion of no sales at farm auctions and what will the reduction in land rents be. The big question is how far will the liquidity in agriculture go, and what will the appetite of investors be moving forward?
Read more.

Farm Back
A new program established by the Community Foundation of Greater Des Moines, allowing land donors to continue to receive rent income or crop proceeds during their lifetimes, also ensures that the land continues to be farmed and at the same time gives donors an opportunity to maintain a voice in how the land is managed – and by whom –both while they’re alive and after they’re gone. The Des Moines Register reports that farmers participating in the Keep Iowa Growing program can receive tax breaks and state tax credits of up to 25 percent of the value of the gift.
Read more.

African Ag
Veteran ag reporter Ken Root is teaming up with analyst Maurice Clark to tour farming operations in South Africa, Zambia and Mozambique. The fall trip is being underwritten by Peoples Company, and is intended to explore farming practices and potential for investment opportunities in these arable African regions. Root and Clark, who are knowledgeable in farming techniques, mechanization, and assessment of investment risk, will visit farms owned by Susan Payne, Executive Chairman and CEO of EmVest Asset Management. Root plans to deliver a report of the trip on Agribusiness Radio Network and Agribusiness Report on WHO-TV, during and immediately following his trip. Initial observations will be posted on the Land Investment Expo website, as well as Peoples Company’s blog and social media properties (Facebook, Twitter, YouTube, LinkedIn). Payne, who will return in January to Iowa to speak for a third time at the Land Investment Expo, will share an illustrated overview of the trip with presentation slides that include photos or video of what is captured October 6-13.
Read more.

Simple Math
With a focus on supply and demand in the face of exploding worldwide populations to feed, The Sovereign Investment Daily reports on the importance of not over-complicating one’s approach or failing to set up “substantial future gains” by not considering how dwindling acres of earth’s crop-producing land relates to a portfolio. Since the 1940s, the U.S. has seen nearly 20 percent of its farmland go by the wayside. In lieu of getting too caught up on the latest SEC fillings or price-to-earnings, the editors suggest doing the simple math as the price-per-acre on farmland is set to eventually “go a whole lot higher.”
Read more.

Prime Time
Julie Koeninger in her “Farmland Investment Primer” white paper published in July by GMO LLC, covers the characteristics of and potential risks associated with farmland investing. Uncorrelated with financial asset returns, Koeninger writes, farmland offers “genuine portfolio diversification for institutional investors” and is an asset class that has not only strong investment fundamentals, but also boasts potential for “attractive cash yields. Land management, investment vehicles, and the fundamentals of supply and demand are each covered in this comprehensive summary with notes on a cross-regional approach and “targeted farmland investment in certain regions.”
Read more.

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Iowans to Tour Farms in South African region Oct. 6-13; Gauge Investment Potential

CLIVE, Iowa – A group of Iowans will assess the outlook for agricultural investments in Africa on a weeklong fact-finding tour next month to farms in South Africa, Zambia and Mozambique.

The delegation headed by noted ag journalist Ken Root and analyst Maurice Clark will tour properties managed by EmVest Agricultural Corp., a Pretoria, South Africa-based ag fund involved in growing, processing and distributing various commodities across five countries in sub-Saharan Africa. Participants in the Peoples Company Africa Tour organized by ag real estate specialists Peoples Company will view farming practices in this emerging market firsthand on Oct. 6-13.

Home audiences can get their own view of the region through the lenses of farming techniques and mechanization as well as investment risk assessment through reports during and after the trip. Root and a videographer aim to document farming practices, culture, government regulations and overall land productivity as presented by EmVest farm managers.

Reports from the field will be posted on the Twitter, Facebook and YouTube accounts of Peoples Company, on its website and blog. Root also plans to air updates on the Iowa Agribusiness Radio Network and on the Agribusiness Report during newscasts on WHO-TV, Des Moines, and KCRG-TV in Cedar Rapids. A thorough perspective will be a feature of the eighth annual Land Investment Expo presented by Peoples Company on Jan. 23 at the Sheraton Hotel West Des Moines.

The seed for this fact-finding tour was planted in a Land Expo keynote by EmVest CEO Susan Payne at the fourth annual event in 2011, said Peoples Company President Steve Bruere. Payne’s initial talk on agriculture’s role in food security to communities, regions and countries was well received by the Land Expo audience and earned her a repeat invitation in 2013, when she termed opportunities in Africa “the highest impact investment you can make.”

Payne also commented that she likes coming to Iowa because it’s the agricultural heartland of America and she operates from the agricultural heartland of Africa.

Through repeat visits to the Land Investment Expo in 2011 and 2013, “Susan opened everyone’s eyes as far agriculture in Africa,” Bruere said. “A lot of people now view Africa as the final frontier for agricultural production in the world.”

“What’s very intriguing to me about what Africa can offer is not only as a producer but also as a supplier. With a growing population of hungry people in the region, it’s a domestic market play for investors. This Iowa delegation will be seeing the ability to produce and helping to understand what’s going on with the economy and other factors land investors must look at.”

This year’s update on African agriculture should fit nicely with keynote presentations by other experts already confirmed for January’s 2015 Land Investment Expo, Bruere added. Influential investor Dennis Gartman, who keeps a close eye on Brazilian soybeans, corn and cotton in his role as editor and publisher of The Gartman Letter as well as frequent contributor on CNBC and Bloomberg TV, will discuss commodities and capital markets. Eric O’Keefe, editor of The Land Report, the magazine of the American landowner, also will appear as a keynote speaker.

More information about the 2015 Land Investment Expo is available at www.LandInvestmentExpo.com or by phoning 855-800-LAND (5263).

Note to editors:

Headshots of EmVest Agricultural Corp. Executive Chairman Susan Payne and agricultural journalist Ken Root are available at:

Payne http://email.altstudios.com/pr/peoples/susan-payne.jpg

Root http://email.altstudios.com/pr/peoples/ken-root.jpg

Peoples Company Africa Tour logo highlighting location of South Africa-Zambia-Mozambique region is available at: http://email.altstudios.com/pr/peoples/pc-africa-tour.jpg

About Peoples Company
Peoples Company is a leading provider of ag real estate brokerage, land management, appraisal and investing services in the Midwest. It provides a range of services, including aggressive marketing strategies employed in its innovative approach to land brokerage and land auctions, as well as land management, appraisals and land investing. Its annual Land Expo attracts 600-plus attendees with keynotes by some of the biggest names in land investing and ownership. See more at www.LandInvestmentExpo.com. Peoples Company is licensed to sell real estate in Iowa, Nebraska, Missouri, Minnesota, Montana, North Dakota, South Dakota and Illinois. For more information, visit www.PeoplesCompany.com or call (855) 800-5263.

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There is a Ton of Money out There!

Thoughts on the outlook for land values, farm profits, and little comparison to the 1980s.

There is a ton of money out there, land is an inflation hedge, balance sheets are strong, and things are different now than they were in the eighties. These are some of the points that are made when the topic of land values comes up today.

With the prospect of selling corn for less than $3/bushel out of the field this fall, the coffee shop conversations have turned from record-high land sales or staggering cash rents to the discussion of “no sales” at farm auctions and what will the reduction in land rents will be.

You don’t have to look very hard to find a farmer who terminated his or her farm lease, or banker capping out operating lines for cash rents exceeding $300/acre. I have grown up in production agriculture. And until this year, I’ve never seen a farmer terminate their lease. It’s always the landowner seeking a better opportunity. For the first time in my career, I will experience a reduction in cash rents. Something that’s not been seen since the eighties.

Though things in production agriculture have turned from bullish to bearish in a short period of time, there doesn’t seem to be a consensus on where land values are headed. Similar to any market looking for direction, there’s going to be greater volatility and wider range of outcomes until that direction is established.

There are examples of soft land sales, yet you can find an equal number of strong sales that rival the record prices of 2012 and 2013. This trend continues to be driven by the fact that farmland purchases aren’t always economically driven. With record farm profits, historically low interest rates, and a lack of alternative investments, farmland continues to be the investment of choice for farmers and many investors.

Furthermore, unlike a house or commercial building, farmland often trades generationally, which means the time to buy is when a successor generation finally decides to sell. Given the record profits in production agriculture, if a piece of land comes up for sale next to your farming operation, the attitude has typically been to buy even beyond what makes economic sense.

In other businesses, this is called a “blue sky” investment and value placed on the business above its obvious economic return. Unfortunately, your neighbor was also operating on the same philosophy. To put it simply, today’s land values aren’t supported by today’s economics but rather the record profits of those in production agriculture.

In fact, farmers have represented nearly 80 percent of all land purchased over the past three years, as investors have by and large been sitting on the sidelines. We all recognize changes on the horizon. At the same time, there is still hope that the commodity market will bounce back and business will continue as usual.  While that is my hope as well, I’m not as optimistic as some. The wealth creation that we have experienced over the past five years has been staggering. In 2008, the average price of Iowa farmland was $4,468/acre. In 2013 the average price had nearly doubled to $8,716/acre, resulting in a market cap of $255 billion for Iowa farmland, or $120 billion in new wealth over that five-year period.

So, where were we in 2008 and where are we at today? In 2008, the price of corn averaged $4.78/bushel and the 10-year treasury was at 3.66 percent. Corn averaged $5.96/bushel in 2011, $6.67/bushel in 2012, and $6.22/bushel in 2013. The 10-year treasury bottomed out at 1.80 percent in 2012, the same year the price of corn peaked – creating a perfect storm for land values – and not surprisingly creating the peak in the land market in 2013.

What’s the difference between today and 2008? Unfortunately, not so much. Balance sheets are certainly stronger coming off of three years of record profits, and interest rates are nearly 1 percent lower than they were in 2008. But that’s about it.

On the bearish side, commodity prices are at levels comparable to 2007, when farmland values averaged $3,908/acre. The general consensus is that there is a ton of money out there, meaning land values won’t likely fall as much as they potentially could. And though I agree with that statement in some cases, I don’t think it will be the case consistently.

For example, if you were willing to accept a 3.5 percent cap rate on $400 rent in 2012, that means you’d be equally as willing to pay $11,428/acre for a piece of land. Given the high demand for land in 2012, cap rates decreased to 3.5 percent as farmers and investors competed to own land. Now that the frothiness is out of the market, I expect not only cash rents to decline but cap rates to increase, as well.

If cap rates were to increase to 4 percent and $400 rent is reduced to $350, then this would translate into $8,750/acre, and a 25% decrease in land values.

What will ultimately prevail? Are we headed back to 2008 where farmland values were nearly 50 percent off of today’s levels? Will values decline by 25 percent per the example I outlined above? Or will the statement that “there is a ton of money out there” trump the economics and preserve current land values?

For many investors, land is being purchased as an inflation hedge. Not only has land inflated since 2008, so has almost every other asset class. This begs the question of what will land values do in an inflationary environment? Would an inflationary environment cause land to inflate further, or will inflation trigger higher interest rates and ultimately a reduction in land values?

I’m certainly not making a prediction. The liquidity that is in the ag economy will continue to prop values up in many cases. In other cases, where neighbors aren’t driving values with blue sky bids – and it’s purely economically driven – sale values should come down.

The big question is how far will the liquidity in agriculture go, and what will the appetite of investors be moving forward?

I agree with the statement that there is a ton of money. But I do not believe that money will overpay for land consistently and, ultimately, land values need to reconcile with the economics of current commodity prices and interest rates. What I can’t get my hands around is how land will perform in an inflationary market and is there so much money in the system in general that land will continue to inflate as investors look for a place to store cash.

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Land Report Editor Eric O’Keefe to Deliver 2015 Land Expo Presentation

Steve Bruere, left, with T. Boone Pickens and Eric O'Keefe at the 2014 Land Expo in West Des Moines.

As editor of The Land Report – The Magazine of the American Landowner – Eric O’Keefe’s opinions and insights on land and landowners have been featured in The New York Times, The Wall Street Journal, and Investor’s Business Daily.

The Rice University graduate is a licensed Texas broker. He has written for dozens of publications, published numerous books, and has had a screenplay turned into a $15 million feature-length film. Over the course of his career he has interviewed a Who’s Who in America, including T. Boone Pickens, Clint Eastwood, Francis Ford Coppola, Hank Aaron, Jay Leno, Julia Child, Nolan Ryan, Ted Turner, Tom Selleck, Tommy Lee Jones, and Willie Nelson.

O’Keefe will appear at a keynote presenter during the 2015 Land Investment Expo presented by Peoples Company in West Des Moines, Iowa. The Land Report’s Fall 2014 “Land to Table” issues is online and available to view at www.LandReport.com. Follow the Land Expo on Twitter, and save the date for January 23, and visit our website to register today.

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Land Institute Announces Results of September 2014 Trends and Values Survey

September 17, 2014 – The Iowa Chapter of REALTORS® Land Institute is pleased to announce the results of our September 2014 Land Trends and Values Survey. Our REALTORS® Land Institute Chapter is an affiliate of the National Association of REALTORS® and is organized for REALTORS® who specialize in farm and land sales, management, development and appraisal.

Participants in the survey are specialists in farmland, and are asked for their opinions about the current status of the Iowa farmland market. Participants were asked to estimate the average value of farmland as of September 1, 2014. These estimates are for bare, unimproved land with a sale price on a cash basis. Pasture and timberland values were also requested as supplemental information.

The results of these surveys show a statewide average decrease of cropland values of -3.4% for the March 2014 to September 2014 period. Combining this decrease with the -5.4% decrease reported in March 2014 indicates a statewide average decrease of -8.8% for the year from September 1, 2013 to September 1, 2014.

The nine Iowa crop reporting districts showed a mixed response. The districts varied from a 3.1% increase in SE district to a -6.5% decrease in NE district since March 2014. Factors contributing to current farmland values include: lower commodity prices, increasing interest rates. Other factors include: lack of stable alternative investments, cash on hand, and limited amount of land on market.


The Iowa Farm & Land REALTORS® farmland value survey has been conducted in March and September since 1978. This survey plus the RLI Farm and Ranch Multiple Listing Service are activities of REALTORS® specializing in agricultural land brokerage on a daily basis.

SOURCE: THE REALTORS LAND INSTITUTE, IOWA CHAPTER #2

MEDEA CONTACT: Kyle J. Hansen, ALC – 515-382-1500

www.rlifarmandranch.com

 

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Documented Trip to Explore Farming Practices in Arable Regions of Africa

Well-known ag reporter Ken Root will lead a delegation traveling in October from Iowa to South Africa, Zambia and Mozambique, on a trip underwritten by Peoples Company and intended to explore farming practices in the arable region through the eyes of American analysts.

Red Tractor on African LandRoot and analyst Maurice Clark, who are knowledgeable in farming techniques, mechanization, and assessment of investment risk, will visit farms owned by Susan Payne, Executive Chairman and CEO of EmVest Asset Management. They will document the farming practices, culture, government regulations and overall productivity of the land as shown by Payne and her farm managers.

Root also plans to deliver a comprehensive report of the trip on Agribusiness Radio Network and Agribusiness Report on WHO-TV, both during and immediately following his trip, and will post several of the delegation’s initial observations on the Peoples Company blog website and Facebook page.

Payne, who will return to Iowa to speak for a third time at the Land Investment Expo in January, will share an illustrated overview with presentation slides that include photos or video of what is captured during the October 6-13 tour.

Root, who documented the early development of agriculture in China and Brazil while following their growth over the past four decades, has emceed the Land Expo each year since its inception in 2008. Clark has an extensive financial and government service background.

Be sure to follow Peoples Company for more near-real-time updates on the Africa tour and 2015 Land Expo streaming at www.Twitter.com/PeoplesCompany.

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