This year, in several markets, farmland values have increased by over 20 percent. Neither the stock market nor ownership of gold can say the same. Though not without risk, many investors look at owning farmland as a safe investment over an extended period of time of ownership. The old saying is a true today as when it was first spoken, "Buy land, they aren't making any more of it."
We have seen a sharp increase in crop prices this year, also. Corn prices have increased by about 70 percent. That is an incredible rate of increase. Nearly half of the corn raised in the United States is sold overseas. Higher gas prices are also pushing up demand for corn and ethanol. As other nations around the world develop, so does their appetite and their ability to purchase better food and more meat from the United States. The drought in the Midwest is also decreasing supply of crops and increasing the demand for American grown crops. Increased demand for crops is helping drive an increase in demand for quality farmland.
Technology, on the other hand, is increasing. The use of new and improved technology allows farmers to grow more for lower costs. As production is increased and costs are decreased to produce crops from the land, land that becomes more productive may increase in value.
As populations in the United States grow - so does the demand for land for housing and other urban uses. Cities were often originally built near or at locations of good, productive soil for food production. So, as larger cities grow that are near agriculturally rich, fertile lands, so also grows the demand for farmland that may have a different urban use - a use other than farming.
It is hard to invest in farmland. Most farm sales are for cash or mostly cash and some financing. Buying land is not like buying a home in town. Land is mostly paid for in cash. Home are mostly paid for by loans from a bank over 30 years. Most people don't have cash (or credit if possible) to go buy a farm for a few hundred thousand dollars let alone a few million dollars. Cash is generally required to purchase modern equipment and livestock and to operate. Then there is a maze of due diligence and site selection requirements a buyer will need to navigate through - either on his own or with the trusted assistance of your team of advisors including reliance on your experienced broker with specialized skill and education and training in farm and ranch brokerage.
For investors looking to own land, quality farmland ownership provides steady cash flow through cash rents. Farmland rents are traditionally thought of as secure with plenty of demand from potential renters. There are many risks also in owning farmland, including government policy, droughts, poor management, changes in mother nature and other variables that can be difficult to manage or plan for.
As demand for crops and food increases, and as the demand for land increases, so may prices continue to increase. Land values are cyclical and a good land broker can help you with the purchase, sale, management and stewardship of the land.
Knipe Land Company is a 70 year old real estate firm specializing in investments and acquisitions of farms, ranches, timber, land for agriculture and land for development. Knipe was involved in the sale of one of the largest cattle ranches in the United States in recent years and was selected as one of America's Best Brokerages in 2010 and 2011 by the Land Report Magazine. For more information on farms and ranches for sale, or for help in buying, selling or managing a farm or ranch, contact John Knipe at (208) 345-3163.
John Knipe is the President and designated broker of Knipe Land Company. He also serves as President of the World Organization Land Federation. Knipe severed several years as the President of the Idaho Realtors Land Institute and Knipe held national office twice as Regional Vice President of the National Association of Realtors - Realtors Land Institute. For more information on farms and ranches for sale, or for help in buying, selling or managing a farm or ranch, contact John Knipe at john@knipeland.com or go to http://www.knipeland.com
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