Buyer Beware, or Beware of Buyer

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
(Getty images; Photo illustration by Barry Falkner)

The blazing-hot farmland market has leveled off over the past six months. Fewer farms are for sale. Fewer records are being set. A few auctions have resulted in no sales, but brokers say prices have shown no signs of major decline.

As invested as farmers are in price movements, they often care just as much about who's buying. Why wouldn't they be, especially when headlines echo around the internet about Bill Gates or the Mormon church adding to their already vast land holdings? When they see states banning Chinese ownership of farmland, it must be because the Chinese are on a shopping spree that must be stopped.

It's rarely that simple.

The difficulty with tracking land ownership trends is that every state has its own set of rules around how property titles are recorded. And, in many cases, LLCs are the buyer of record. Whoever is listed as the agent for that business may or may not actually be the person who holds the deed. These companies can be designed to hide the identity of a buyer, but they're also frequently used by farmers to keep land and operating interests separate. Reforming this system would have vast implications for how farms manage their assets.

There's very little clear data on the buyer side of the market, which is why it lends itself so well to gossip. I speak frequently with the brokers involved in these transactions, and they tell me that the buyers are overwhelmingly farmers.

Farmers National Co., one of the nation's largest farmland brokerages, says 80% of the buyers last year were local farmer operators. This is the group that tends to win auctions and pay higher prices, because a land purchase can boost their business and increase revenues.

An investor may not be as enthused about a 2% annual return in the era of 5% certificate of deposits. They're hoping to buy low and sell high after giving land values time to appreciate.

Most investors aren't from Wall Street. The largest group of investors are local people -- doctors, attorneys and other wealthy citizens -- looking to diversify their portfolio and invest in their communities.

As for the Chinese? There's little evidence to support the shopping-spree theory, although the Government Accountability Office has questioned the accuracy of USDA's data. A legislative fix will likely be part of the next farm bill.

So, who bought the land down the road last fall? It was probably someone you know.


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