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The Garman Letter Founder Dennis Gartman Scheduled for 2015 Land Investment Expo

Dennis Gartmam has been directly involved in the capital markets since August of 1974. The editor and publisher of The Gartman Letter, whose clients include many of the leading banks, broking firms, mutual funds, hedge funds, energy trading companies, and grain trading companies, will share a keynote presentation with attendees of the 2015 Land Investment Expo on January 23.

Dennis GartmanFollowing his graduate work at the North Carolina State University, Mr. Gartman, who was an economist for Cotton, Inc. in the early 1970s, analyzing cotton supply/demand in the U.S. textile industry, went to NCNB National Bank in Charlotte, North Carolina, where he traded foreign exchange and money market instruments.

In the late 70s, Mr. Gartman became the Chief Financial Futures analyst for A.G. Becker & Company in Chicago, Illinois. Mr. Gartman was an independent member of the Chicago Board of Trade until 1984, trading in treasury bond, treasury note and GNMA futures contracts. In 1984, Mr. Gartman moved to Virginia to run the futures brokerage operation for the Sovran Bank. In 1987, Mr. Gartman began producing The Gartman Letter on a full-time basis, and he continues to do so today.

Mr. Gartman served a two-year term as an outside Director of the Kansas City Board of Trade from 2006-2008. He has been a member of the Suffolk Industrial Development Authority, and now serves on the Investment Committee of both the University of Akron and the North Carolina State University.

Mr. Gartman, who has lectured on capital market creation to central banks and finance ministries around the world – and has taught classes for the Federal Reserve Bank’s School for Bank Examiners on derivatives – appears often on CNBC, ROB-TV and Bloomberg television, discussing commodities and the capital markets, and speaks before various associations and trade groups around the world.

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Dr. Simon Atkins Land Expo Keynote to Focus on Climate Economy

Climate economist Dr. Simon Atkins is a commodity yield expert with a business and scientific focus on global climate shift and hot-spot threats to economies, industries, societies and environments, as well as customized agricultural risk exposure strategies, weather-biased commodity investments, and Black Swan prediction and assessment.

Dr. Simon AtkinsDr. Atkins, a doctor of climate science and a macroeconomist, as well as an author and a leader in innovation in physics and Planetary Risk Management, will return to speak at the 2015 Land Investment Expo following his last West Des Moines appearance in January 2013.

With a wealth of knowledge gained from visiting 69 countries, Dr. Atkins, MBA, PhD, DSc, advises on vulnerability assessment “hotspots” for optimized security planning and business continuity. As CEO of Advanced Forecasting Corporation, a Planetary Risk™ think-tank, he provides climate change hazard and Black Swan event consulting to agriculture, energy and 20 other industries, Fortune 500 businesses, and investors affected by natural-based perils.

Mounting natural disasters as of recent have become of greater concern in strategic planning and monitoring the exposure of one’s asset classes. In a world necessitating disaster threat advisement, Dr. Atkins’ deliverables in hotspot predictions allow clients to gauge strengths or liabilities in their investments, market positions or economic interests all over the world, particularly in water shortages, commodity price fluctuations, solar flare interferences, power grid disruptions, disease outbreaks, natural and technological influences on geopolitical instability, and socio-economic complexities.

Dr. Atkins (on Twitter) is known around the world for his passion, forecast accuracy, entertainment, and motivation to deliver positive change. His futuristic, yet clear, details provide mechanisms to better gauge the hazards in our rapidly morphing world.

Register for the 2015 Land Expo at www.LandInvestmentExpo.com.

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Meet Intern Ben Zhu with the Peoples Company Land Investment Programs Team

Qi “Ben” Zhu joined Peoples Company in September as the newest member of our land services organization’s thriving internship program. The Shanghai native is a recent graduate of Louisiana State University, where he earned a MS Finance + M.B.A. dual degree with an emphasis on investments.

Ben’s passion for research and expertise in finance and investments are apparent with a background that’s included international experience in the China, Brazil and the United States, as well as the proficient use of Bloomberg, Morningstar and other tools as part of LSU’s Graduate Assistantship program.

He displays a keen focus on both agriculture and the commodities markets, and at the university co-managed a portfolio for the LSU Foundation that achieved a 24 percent return (annualized) over two years. He has also been advised on economic issues and stock investments by Omaha billionaire Warren Buffett – meeting with the man on two different occasions – and eaten dinner with Wall Street legend Jim Rogers during a VIP event following the 2013 Land Investment Expo.

Ben, who relocated to the Des Moines-area from Baton Rouge, is bilingual in Mandarin and English. He attended Shanghai International Studies University and earned a bachelor’s degree in Economics in 2011. He also holds a Certificate of Minor in Accounting from the Shanghai University of Finance & Economics.

An avid chess player and member of the Wall Street Journal Young Professionals Network, Ben is certified in the Bloomberg Equity Essentials Trainings Program and was ranked in the 95th percentile in the Bloomberg Assessment Test.

At Peoples Company, Ben is a member of the Land Investment Programs team and works to meet the needs of and uncover opportunities for clients alongside our dedicated agents and staff operating in Clive and throughout the Midwest.

He is 27-years old.

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Africa Tour – Part 4 – Generational Views

Ken Root concluded his trip to Africa with a flight home this past weekend. He comments on the regions he’s seen, and the economic and social prospects for countries that divided their people for so long that bringing them back together may take several more generations.

Southern Africa is almost 10,000 miles, a full-day flight, from the middle of the United States. It is a long way away in distance and understanding by Americans.

I visited farms and cities in three countries over a 12-day period and found it to be as diverse as any place I’ve seen on the globe.

Sunset in Dry country on Zambezi

Sunset in dry country.

The European Influence here goes back to the 1500s. But equality between races was only legislated in the past 20 years. I spent the last part of the trip touring the Apartheid Museum in Johannesburg, and traveling to Cape Town in the far southern area of the country. It sensitized me to the political challenges all South Africans face.

Disparity between races remains the most noticeable feature of this beautiful landscape. Until the 1990s, there were three classifications: white, colored and black. Simply put, anyone who was not white was segregated into a lower status. The blacks were at the bottom, and are still the most economically challenged. We saw many people of color working in all aspects of business, but the top of the food chain is still white.

Farmers, the whitest of them all, feel they may be dispossessed of their land if the majority black government can see any remnants of colonialism, or if it needs votes from blacks who want land.

Nelson Mandela surprised the world when he called for unity, place and reconciliation. His government

Ken Root on Zambezi River.

kept the economic base and socially integrated the populace, but the real challenge is to educate and motivate the majority to match the white minority.

So far, so good but each election in the post-Mandela period holds the prospect that a new government could change the course of the country and send its economic system in to ruin.

I will continue to summarize the trip with photos and video as we get back to easier surroundings.

Thanks to Maurice Clark, who served as economic analyst and Michael McClean, our videographer. We went hard, early to late every day under the guidance of Susan Payne, Executive Chairman, and Koos DeKlerk, General Manager, both of Emvest Investments.  Also Piet DeKlerk, Koos brother, who was our guide in Zimbabwe. What an amazing family!

A book about the economic downfall of Zimbabwe features them. It is titled: “The Last Resort” by Douglas Rogers, published in 2010.

 

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Land Investment Monthly – October 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.

Big harvester

African Root
Veteran ag broadcaster Ken Root recently returned from Southern Africa, where it is early spring and he had been filing reports for the past week while traveling with photographer Michael McClean and investment analyst Maurice Clark. The U.S. team travelled with Susan Payne, executive chairman of EmVest, and were meeting with local farmers while taking a close look at agricultural potential in three countries: South Africa, Mozambique and Zambia. Check out Ken’s initial observations and register for the 2015 Land Investment Expo to learn more.
Read more.

Iowa Prime
Forbes contributor Joshua Rogers points to indexes of land values in Iowa as a prime example of why institutional investors and high-net-worth individuals are flocking to an asset class that’s solidly beaten the stock markets since the late 1990s. His in-depth look includes thoughts on the capital appreciation investors can receive, in addition to annual incomes generated by productive farmland.
Read more.

Growing Research
National Geographic Magazine points to calls for greater public support and renewed investments in agricultural research in order to double crop production, keep up with rising demand for grain to feed peoples and animals, and to meet the needs of a worldwide population that’s expected to grow by about one-third by 2050. With biotechnology and better seeds providing “a key piece of the puzzle,” overcoming the challenge of increasing yields while protecting the environment will also require putting knowledge in the hands of farmers and creating “leverage points” in places such as as sub-Saharan Africa and southern Asia.
Read more.

Tide Line
Farmland has emerged as an attractive investment class due to many positive fundamentals, yet a mere fraction of investor demand has been met due to aggressive farmer bidding and buying. With the tide turning and the investor’s share trending back up, Ron Beach on the Peoples Company blog explores the outlook of farmers who – amid a lack of profits, shrinking working capital and the recent leveling off of land values in some areas – are becoming more cautious.
Read more.

Looking North
Farmland prices in Canada grew slowly or held steady in 2014 with some areas of the country still seeing record increases. CBC News reported that prices rose in parts of Ontario and Alberta, with lows of $950 an acre in Saskatchewan to highs of $63,000 an acre in British Columbia. The outlook on ag remains positive, despite dipping commodities prices, and farmers are reportedly taking a long-term view as low interest rates entice producers considering an increase in crop acres.

Lands of London
London property values reached a new level this summer, and over the past decade increased 135 percent in value. But farmland far outperformed the prime residential sector there, growing at twice the rate during the same period – by 270 percent – and making it three times the price of ag real estate in America, and 15 times the price of similar farmland in Australia. Long hailed as an input for farmers and hedge against inflation for investors, The Economist magazine takes a look at farmers who’ve benefited from a global surge in commodity price.
Read more.

Big Eight
Eight states, including Iowa, Nebraska, South Dakota and North Dakota, Minnesota, Kansas, Indiana and Illinois, among other states, fueled huge gains in US farmland values from 2005 to 2013. Citing a blogger’s comments on climate, commodities, ethanol and crop insurance, Ag Web Editor Ben Potter breaks down the numbers and reports on significant increases across the Midwest and Plains regions. Only one geographic region, the Chesapeake Bay area in the northeastern United States, saw a minor decline in farmland values during the same period.
Read more.

Long View
The declining grain markets present an opportunity to refocus attention on the most important aspect of the total return to ownership, and land value appreciation. Randy Luze discusses on the Peoples Company blog why investors should balance their desire for an annual cash return with land improvements that will maximize returns over the long run.
Read more.

Big Questions
Peoples Company is hosting a November 3 meeting intended to shed light on “Big Questions” facing landowners and farm producers with presentations regarding the future of land values and the Farm Bill. The seminar, beginning at 5:30 p.m. at the West Des Moines Marriott on Jordan Creek Parkway, will also cover cash rents and maximizing returns. Appetizers will be served. The event is free. RSVP to Becky at Becky@PeoplesCompany.com.

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Africa Tour – Part 3 – Mozambique to Zambia

Going from Mozambique to Zambia is like passing from dawn to full daylight. We flew into Livingstone on a plane loaded with tourists who came to see Victoria Falls. It is a mile-wide cascade on the Zambezi River and considered one of the seven wonders of the world. Our interest in the river is for irrigation to support a developing agricultural system.

Riding through bush in Zambia with a local farmer.

Traveling with us is Koos DeKlerk, General Manager of Emvest Investments. He was born into a farming family in Zimbabwe, speaks four languages, and is an excellent agriculturalist. His family had the largest commercial farm in the country until they were kicked out in 2004 by the Mugabe regime. The land is now owned by the past Minister of Agriculture and was not parceled out to small farmers as promised by the president.

Koos was not dismayed by his treatment as he and hundreds of other Zimbabwean farmers moved across the river and began to develop Zambia. He worked six years to develop a farm called Kalonga. Proof of the Zim’s determination shows in Zambia’s agricultural productivity that has shot upward in the last decade.

We drove to a field where wheat was being harvested off an irrigated farm near the end of the dry season. Except for the big river that adjoins it, and the wildlife that passes through, you would swear you were in the heart of Kansas. The white wheat was bred for the area and grew just over five months from planting to maturity. It was being combined by a John Deere 9650 with a Mac Don Header. The yield was averaging 135 bushels per acre.

We also saw commercial banana plantations and very sizable fields of peanuts. The peanuts grow well in the sandy soils and are a native crop for Africa.  Bananas are a staple in the local diet and are desirable in cities across Southern Africa.

Irrigation on wheat in Zambia.

The problem is processing and infrastructure. There is a good road so the unshelled peanuts are transported 600 hundred miles to a processor in South Africa. Bananas also require processing and distribution in a timely manner. The industry is just now learning how to get food products into the local market.

Tourism along the Zambezi River is the source of easy money for Zambia. Hotels cost hundreds of dollars per day and Victoria Falls is visited by people from all over the world.

The future remains uncertain. A scholarly innkeeper thinks the Zimbabwean purge won’t happen in Zambia but he does think there are more tough times ahead for white farmers in South Africa.

There is an uneasiness here as changing governments over to majority black rule has caused politicians to change the status quo.  Flushing colonialism out of Africa is still underway.

-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 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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