What’s farmland

• Three kinds of farmland
  • Arable land <- this book
  • Orchards & Vineyards
  • Meadows & Pastures
• Typically 80~640 acre a parcel/sale
• Corporate farming Reg in the state
  • Loose in Illinois, Strict in MN

Soil and Fertility

• USDA Class I-VIII, I being best
• Fertilizer, Netro / P / K
• Farmland Rating
  • CSR, $75~100 / point
  • CPI
• Tillage : no-till, strip-till
  • Subsidy – $20-30 per acre, maybe max 3 year

Drainage and Irrigation

• Irrigation 
  • increase yield, has risk
  • Aquifer depletion risk
• Drainage – important
  • Drainage map – google earth

Leasing Farmland

• ??Farmer caring for land??
• Cash rent yield ~5%
• Away from crop-sharing: farmer has incentive to neglect those parcel with crop-sharing
• Offtake, related to basis – cheaper near east coast / major waterway
• Farmer Insurance
• Residual Income
  • Water, Mineral, Dev, InfoTower/Billboard, Recreation, Windpower

Organic Farming

• Organic food
  • Higher price
  • Certification
  • Premium is lower when recession

Identifying Farmland

• Farmland transaction season – Nov to April
• Seller – estate sale
• A lot of non-public sale
• Bank Foreclosure / Attorney for Estate sale
• Auction / Price volatile
• *Aberdeen Farm Forum
• Sale is low freq – 1.4% farm sold per year, a sale every 70 years
• Investor + Farmer Partner
• When sale, usually tenant farmer contacted first, then “motivated tenant farm” – a short time window
• Due Diligence
  • Soil Quality, Elevation, Productivity, ~cash rent
  • Appraisal
  • 156 Farm Record
  • Aerial Photo
• Lease & Screen operator/partner
• Capital Improvements
•  

History of Agriculture

Historical Return Profile

• Historical events
  • Great depression – decreased a lot
  • 1980s – overleveraged farmland – ~60% price decrease
  • 2008 – very small 1-3% price decrease

The Nine Billion Question

• Food demand growth
• Soil erosion

Renewable Fuels

• Ethanol
• Wind Energy
  • Up to $15K per year per turbine!!!
    • More like 6-8K per google?
  • South Dakota a lot of wind energy
  • Green Power Express
  • Ballpark 5 cent / KWH

Future of Freshwater

Future Growth and Technology