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New Land Markets Survey Shows Expected Land Sales Growth in 2015

April 13, 2015 (Chicago, Ill.) – Land prices rose steadily by eight percent in the last part of 2014, with individuals and families accounting for sixty-one percent of all buyers/investors in land sales transactions, according to the 2015 Land Markets Survey, conducted jointly by the REALTORS® Land Institute and National Association of REALTORS®. In addition, the survey revealed that fifteen percent of land purchasers were corporations/partnerships, twenty-three percent were investors, and nine percent were expansion farmers.

The 2015 Land Market Survey is aimed at developing accurate information on current trends in the land markets and on the general state of land sales. The results are representative of over six hundred land professional respondents from across the United States and Canada.

According to the survey, forty-seven percent of the purchases where individuals/families bought, the land was purposed for farm and ranch (twenty percent agriculture and seventeen percent ranch) and thirty-one percent for recreation. Of those surveyed, expansion farmers purchased eighty-eight percent of land for farm and ranch use (seventy-one percent agriculture and seventeen percent ranch). Investors purchased a diversified portfolio of land including: thirty-three percent agriculture, fourteen percent timber, twenty-one percent development, and five percent commercial. Of the land purchased by corporations, development land accounted for twenty-eight percent, commercial land accounted for twenty-five percent, and timberland accounted for five percent.

Terri Jensen, ALC Advanced, 2015 Institute National President of REALTORS® Land Institute, stated “The outlook appears strong for several land types and locations. The demand from expansion farmers and investors exceeds supply—particularly in the Midwest states. Grassland/ranch land demand and prices continue to be strong.” Close to ninety percent of the respondents expect moderate to stronger sales growth in the first half of 2015, with prices rising at about three percent.

The results appropriately correlate to the findings that responding land professionals across the United States primarily focus their practices in agriculture (sixty-three percent), recreation (fifty-five percent), and development (forty-eight percent).

The 2015 Land Markets Survey was based on data collected in March 2015. The survey was emailed to one-thousand REALTORS® Land Institute members and approximately nine thousand five hundred non-members and generated six hundred and nineteen usable responses. The Institute has made the full survey available for free online.

View the entire Land Business Survey by clicking here.

About the REALTORS® Land Institute

The REALTORS® Land Institute is the professional membership organization for real estate practitioners who specialize in land transactions. A 71-year-old affiliate organization of the National Association of REALTORS®, the Institute provides a wide range of programs and services that build knowledge, relationships, and business opportunities for the best in the land business. Through its best-in-class LANDU curriculum, the REALTORS® Land Institute confers its Accredited Land Consultant (ALC) designation to only those real estate practitioners who achieve the highest levels of education, experience, and professionalism. For more information, visit www.rliland.com.

Favorable Weather Sets Stage for Early 2015 Planting

Published by Colvin & Co, LLP (April 1, 2015)

Farmers in the Corn Belt are welcoming dry spring weather conditions, which have not been seen in three years. The beginning of March was warm, allowing fields to warm up for spring planting. The last week of March brought colder temperatures but farmers are optimistic planting will commence in early April. The first crop insurance planting date for corn in central Illinois is April 5th; northern Illinois, southern Minnesota, and northern Iowa is April 10th.

Soybean prices decreased this month due to record setting exports of the last five months slowing throughout March. At the end of March, the USDA came out with their Prospective Plantings Report and estimated that soybean planting acres, if realized, will be the largest on record. Estimated corn planting acres decreased for the third straight year, but analysts were expecting a larger decline. The USDA Grain Stocks Report indicated corn stocks were on the high side of analyst expectations resulting in an 18 cent drop in corn prices on the last day of March.

On March 25th, H.J. Heinz Co. and The Kraft Foods Group announced a merger to create the fifth largest global food company and the third largest in the U.S. The new company will be called, The Kraft Heinz Company. The deal was reportedly put together by two of the largest shareholders of Heinz, 3G Capital and Berkshire Hathaway. The merger has been valued at $45 billion and the new company is estimated to have annual revenue of $28 billion.

GRAIN PRICES

May corn prices decreased 3.8% in March and closed at $3.77 per bushel. Early in the month, prices traded sideways at $3.90 due to a lack of fresh news. As the month continued, prices began to slip moderately due to global pressure. China reportedly purchased 600,000 metric tons (MT) of corn from Ukraine, further reinforcing the fear that the strong U.S. dollar will send global buyers elsewhere. Later in the month, prices increased as planting in the southern corn growing states began and warmer weather in the central and western Corn Belt melted the remaining snow. Prices finally declined at the end of the month when estimated corn acres in the USDA Prospective Plantings Report were on the high side of analyst expectations and the Grain Stocks Report estimated stocks higher than expected. Corn planted acres for 2015 were estimated at 89.2 million acres, a 2% decrease from last year. USDA also reported 7.74 billion bushels of corn on hand as of March 1, 2015, an 11% increase from the same time last year

The May soybean contract decreased 6.0% throughout March to close at $9.68 per bushel. Soybean prices decreased in early March as exports dropped from record setting levels. Ideal harvest conditions and improved logistics in Brazil put additional downward pressure on U.S. soybean prices. Prices increased on the final day of March when the USDA estimated planted soybean acres in 2015, though a record, on the low side of analyst expectations. Soybean planted acres were estimated at 84.6 million, a 1% increase from last year. The USDA also estimated soybean stocks have increased 34% compared to last year with 1.33 billion bushels as of March 1, 2015.

May wheat prices decreased 0.4% in March to close at $5.13 per bushel. Early in the month, wheat prices were hampered by poor sales and export performance. The strong U.S. dollar made domestic wheat unattractive on the global market, sending buyers elsewhere. Through the middle and end of March wheat prices increased modestly as the U.S. dollar weakened, but those increases were offset by poor weather reports of areas being either too wet or too dry for proper growth. The USDA estimated wheat planted acres at 55.4 million, a 3% decrease from last year. The Grain Stocks Report estimated wheat stored in all positions March 1, 2015 at 1.12 billion bushels, a 6% increase from last year.

FARMLAND VALUES

The Creighton University farmland price index remained at 39.4 for the third consecutive month. “Even though crop prices have stabilized, demand for farmland remains weak pulling agricultural land prices down again. This is the 16th straight month the index has moved below growth neutral,” said Professor Ernie Goss. Farmers reported a significantly different story with auctions being well attended and the number of “No Sales” declining significantly from a few months ago.

This month bankers were asked, “What percentage of agriculture land sales in your area over the past year have been made to nonfarmer investors?” The average response was 17.5%, a 3.1% increase from what was reported in June 2014. The stabilization of farm prices over the past six to eight months has increased investor interest in the sector. Farmers needing to inject capital into their operation have been more willing to separate with some of their owned acres, and rather than sell it to another farmer many have turned to investors allowing them to continue to operate the land.

The typical farmland buying season is nearing an end as the primary buyers of farmland, farmers themselves, are turning their attention and capital to planting the 2015 crop. Throughout March, farmland sale prices have remained strong across the Corn Belt with a slight increase in farmer leaseback sales which allow farmers to free up capital without decreasing their acres under operation.

SOUTH AMERICAN CROP CONDITION

Harvest through the beginning of March was slow in Brazil. Farmers were delayed by wet weather and continued transportation issues caused by truck drivers striking in response to increases in the cost of diesel fuel, which began in February. Harvest and logistics improved throughout March with drier weather and an agreement at mediation was reached with the striking truck drivers. Approximately 61% of soybean acres were harvested, 4% less than this time last year, according to the CONAB report released on March 25. The largest soybean producing state, Mato Grosso, was near 90% complete, just below last year’s pace.

Civil unrest in both Argentina and Brazil caused concern for the region’s agricultural sector over the past month. Brazilian farmers partook in a national day of protest on March 15. The protests were in response to government corruption claims of the Brazilian President, Dilma Rouseff, as well as rising inflation that weakened the Brazilian Real. Farmers have threatened to halt the sale of their grain if measures are not taken to get the inflation under control.

Similarly, Argentinean farmers have been battling inflation throughout the past six months as well as their own president, Cristina Fernandez de Kirchner, being under investigation for covering up Iran’s role in the 1994 bombing in Buenos Aires. Farmers in Argentina protested against a 35% export tax levied on soybeans by refusing to sell soybeans for three straight days.

Following Brazil’s transportation quandary caused by striking truck drivers and delayed soybean harvest, Brazilian ports have become increasingly backlogged. According to Reuters, there are 123 barges lined up to load soybeans and another 18 barges are expected over the next month. World buyers will favor soybeans from Brazil due to the increasing strength of the U.S. dollar and devaluation of the Brazilian real, but with the lack of advances in port infrastructure and a growing line of barges, the backlog at Brazilian ports will only worsen.

OUTLOOK

In discussions with operators from Illinois, Iowa, and Minnesota they indicated they are ready to start planting in the next few weeks and have already started field work. As the southern states have begun planting we look forward to the upcoming Crop Progress Report due out on April 6th, showcasing winter wheat condition, and rice, sorghum and cotton planting progress.

Barbarians at the Farm Gate

Hardy investors are seeking a way to grow their money
Jan 3rd 2015 – The Economist

In thegate 1 next 40 years, humans will need to produce more food than they did in the previous 10,000 put together. But with sprawling cities gobbling up arable land, agricultural productivity gains decreasing, and demand for biofuels increasing, supply is not keeping up with demand. Clever farmers, scientists and entrepreneurs are bursting with ideas. But they need money to make this jump.

Financiers more often found buying and selling companies have cottoned on to the opportunity. Farm gates have traditionally been closed to capital markets: nine in ten farms are held by families. But demography is forcing a shift: the average age of farmers in Europe, America and New Zealand is now in the late fifties. They often have no successor, because offspring do not want to farm or cannot afford to buy out family members. In addition, adopting new technologies and farming at ever-greater scale require the sort of capital few farmers have, even after years of bumper crop prices.

Institutional investors such as pension funds see farmland as fertile ground to plough, either doing their own deals or farming them out to specialist funds. Some act as landlords by buying land and leasing it out. Others buy plots of low-value land, such as pastures, and upgrade them to higher-yielding orchards. Investors who are keen on even bigger risks and rewards flock to places such as Brazil, Ukraine and Zambia, where farming techniques are often still underdeveloped and potential productivity gains immense.

Farmland has been a great investment over the past 20 years, certainly in America, where annual returns of 12% caused some to dub it “gold with a coupon”. In America and Britain, where tax incentives have distorted the market, it outperformed most major asset classes over the past decade, and with low volatility to boot (see chart). Those going against the grain warn of a land-price bubble. Believers argue that increasing demand and shrinking supply—as well as urbanisation, poor soil management and pressure on water systems that are threats to farmland—mean the investment case is on solid ground.gate 2

It is not just the asset appreciation and yields that attract outside capital, says Bruce Sherrick of the University of Illinois at Urbana-Champaign: as important is the diversification to portfolios that farmland offers. It is uncorrelated with paper assets such as stocks and bonds, has proven relatively resistant to inflation, and is less sensitive to economic shocks (people continue to eat even during downturns) and to interest-rate hikes. Moreover, in the aftermath of the financial crisis investors are reassured by assets they can touch and sniff.

Some are already getting their boots dirty. In 2009 Hassad, part of Qatar’s sovereign-wealth fund, asked Bydand Global Agriculture to buy nearly 50 farms in Australia and merge them into a single investment portfolio. Terrapin Palisades, a private-equity firm, bought a dairy company and some vineyards and tomato fields in California, and converted all to grow almonds, whose price has soared as the Chinese have gone nuts for them. Such conversions require up-front capital and the ability to survive without returns for years.

The private-equity approach can take the form of simple improvements, such as changing irrigation from antiquated dykes and canal networks to automatic spray systems: these are the equivalent of picking low-hanging fruit. Pricey robots can boost milk per cow by 10-15%. Using “big-data” analytics to plant and cultivate seeds can push crop yields up 5%. “This is an industry where the gap between the top and bottom quartile is greater than anywhere else,” says Detlef Schoen of Aquila Capital, an alternative-investment firm.

And yet the 36 agriculture-focused funds, with $15 billion under management, pale in comparison to the 144 funds focused on infrastructure ($89 billion) and 473 targeting real estate ($163 billion), according to Preqin, a data provider. TIAA-CREF, an American financial group, is a market leader with $5 billion in farmland, from Australia to Brazil, and its own agricultural academic centre at the University of Illinois. Canadian pension funds and Britain’s Wellcome Trust are among those bolstering their farming savvy.

Most investors are put off by the sector’s peculiar risks and complexities. Weather, commodity prices, soil health, water access, dietary fads and animal health are not the forte of the average pension-fund investment officer. Political risks abound: cash-strapped governments in Europe and America may (belatedly) get around to cutting farm subsidies. In poor countries, land titles may give outsiders dubious protection—if those countries even allow foreign ownership of land in the first place.

Some liken the sector to real estate and infrastructure 20 years ago. It lacks indices, consultant reports and track records. But unlike skyscrapers or pipelines, farming offers few of the multi-billion-dollar deals that are needed to entice mega-investors.

For more money to flow in, financiers and farmers will have to learn a lot more about each other. Money managers need to get their hands dirty and find out more about crops. Only a handful have the expertise needed; farmers gleefully share stories of Wall Street types wondering how chicks are planted. And farmers can do more to attract capital, for example by seeking out financial deals where investors’ incentives are aligned with their own, such as through joint ventures.

Investors need to separate the wheat from the chaff, too. Farm investing requires patience; it is ill-suited to flipping and trading. But those willing to climb over the barriers could reap big rewards. The investment thesis is as simple as they come, as Mark Twain realised long ago: “Buy land, they’re not making it any more.”

 

The Best Long-term Real Estate Investment: Farmland

By Richard McGill Murphy, Special to CNBC.com

From his office on Broad Street in lower Manhattan, Jeff Notaro oversees a modest portfolio consisting mainly of dirt. Specifically, Notaro’s Black Sea Agriculture fund invests in farmland in northeastern Bulgaria, near the Black Sea. The $1.5 million fund buys prime agricultural land and leases it back to local farmers.

Notaro is riding a growth market. Since 2004, Bulgarian farmland has been appreciating at an average annual rate of 19 percent. Yet Bulgarian land is still cheap compared to the United States. The average price per acre for good-quality land is $1,850 in Bulgaria versus $5,000 an acre in Kansas.

Land along the Black Sea coast commands higher prices because it’s especially fertile and also close to deep-water ports. Black Sea wheat land costs $4,300 an acre on average but yields an average of 71 bushels of wheat an acre, compared with 42 bushels an acre in Kansas. “That’s about half the cost per acre on a yield basis,” Notaro said.

The rise in local land prices has been fueled mainly by a worldwide agricultural commodity boom that has driven food prices up by more than 100 percent since 2003, according to the Food and Agriculture Organization of the United Nations (FAO).

“More people need to get into farming; otherwise, we won’t have any food,” said commodity investor Jim Rogers, who launched the international Quantum Fund with George Soros in the early 1970s and went on to create the Rogers International Commodities Index, which tracks the performance of numerous commodities in global markets, ranging from agriculture to metals and energy products.

Rogers and Notaro belong to an increasingly active community of farmland investors hoping to profit from the world’s growing need for nourishment. “I’m still wildly optimistic about the future of agriculture worldwide,” said Rogers, who has served as an advisor and as a director to companies that hold farmland in Australia, Brazil and North America.

The outlines of the investing case for farmland are well known at this point. The global population is expected to peak at slightly more than 9 billion by 2050, up from 7 billion today. On a per capita basis, the FAO projects that the amount of arable land available will decline steadily over the next few decades, from 0.218 hectares per person today to 0.181 hectares per person in 2050.

On the demand side, much of the growth in population and food consumption will occur in the developing world. As income levels rise in developing countries, consumers there are consuming more meat. Livestock production consumes massive quantities of grain and water, spurring farmers to boost both crop yields and land under cultivation.

Soaring demand for biofuels is another significant demand factor. In the U.S., for example, ethanol production accounts for 23 percent of total corn utilization, according to the Renewable Fuels Association.

Average U.S. corn prices tripled between 2005 and 2012, from $2 a bushel in 2005 and 2006 to $6.22 a bushel in 2011 and 2012. The price surge was partly caused by a rising demand for ethanol, along with other factors, including flooding and drought, higher prices for inputs like fuel and fertilizer, rising demand for meat, and upward movement in commodity markets.
In turn, rising agricultural commodity prices have driven a 128 percent rise in average Midwest farmland values over the past decade, from $1,270 an acre in 2003 to $2,900 an acre in 2013, according to USDA figures.

(Read more: America in 25 years: Here’s what to expect)

The world’s insatiable appetite On the supply side, crop yields have been leveling off since the dramatic advances of the last few decades, starting with the Green Revolution that transformed agriculture in China, India and elsewhere in the developing world from the 1960s onward. Today 40 percent of global wheat land is experiencing either flat or declining yields, according to a 2012 article in the journal Nature Communications.

In China, local scientists recently warned that smog levels around the country have risen so high that they are blocking natural light, potentially impeding photosynthesis and creating conditions that resemble nuclear winter.

“We’re seeing land under threat globally,” said Reza Vishkai, head of specialist investments at Insight Investment Management in London. “You can raise production by increasing land under cultivation, but a lot of that land is concentrated in places like Africa and Brazil and requires huge investment to operate on a profitable basis.”

Owners of quality farmland are poised to benefit from all these trends, which explains why so many agriculture investors are bullish on land. Over the next two years, Notaro hopes to boost the size of his Black Sea Agriculture fund from $1.5 million to at least $10 million. This should put him in control of at least 5,000 acres, depending on where land prices head in the near term.

As in many emerging markets, farmland investing in Bulgaria is essentially a consolidation play. After Bulgaria’s Communist regime collapsed in 1990, the new government returned huge expanses of state-owned farmland to its pre-Communist owners. These families often inherited plots of 10 to 15 acres, too small for farmers to realize significant economies of scale.

“The small holdings, in general, are undervalued,” said Notaro. “Local farmers accumulate all these little leases and farm them with small equipment over poor roads. The Black Sea coast has some of the best topsoil in the world, but it’s not producing what it could.”

Heaven is for REAL

Heaven is for REAL 2My seven year old grandson, Aidan asked me a very interesting question last night as I was tucking him into bed, “Grandma is there color in Heaven?” I said, “Of course there is color in Heaven, God would never make a place without color.”  “What if he forgot and everything is black and white and the mountains weren’t green and the sky isn’t blue.” Once again I said, “God would never make a place without color.” He said, “Remember when we were in Montana and you said, this must be what Heaven looks like? When we were at the Montana ranch.” Then I had to agree, he felt relieved that I was assured that there was color in Heaven and he drifted off to sleep in less than a minute.

What is your property that you would call Heaven? What is my property that I call Heaven? To each and everyone there is that property that just makes us feel happy, or comforted, or peaceful. What is the  most wonderful part of being a Real Estate Agent, is it the properties and the people or the people and the properties. Is it the dessert, the mountains, the plains? That is what makes being in Real Estate so wonderful as you work with each individual you embark on a journey to find the property for them that makes them say, “Yes, this is my Heaven.”

Heaven is for REAL 1I was trying to figure out exactly what I would write about, calving season beginning, sheep sheering, ice fishing…and then when asked by my special little Aidan that one question my approach became clearer. The place I spoke of earlier is Half Moon Ranch in Montana, can I live there, NO! So upon evaluation I came up with this, I am the  most blessed person on earth and I own a little piece of Heaven right here in North Dakota. I get to work with so many wonderful people each and every day. We have the most wonderful soil so right now I am thinking of what I can grow this year, we have warm nights to get the most out of our short growing season, and can get almost as green as Ireland! Now I say my friends, this truly must be “Heaven.”

Farmland Index Rebounds from All-Time Low

Published by Colvin & Co, LLP (December 21, 2014)

Rural bankers see a continued improvement in farmland values, after the farmland price index fell to its lowest level ever in October. The rural economy remained neutral with crop prices on the rise, but oil prices taking a plunge. The majority of bankers surveyed believe producers will cut back on equipment purchases in lieu of decreases in expected farm income.

The Rural Mainstreet Index (RMI), an index which ranges from 0 to 100 with 50.0 representing growth neutral, was unchanged from November, remaining at 50.0. Ernie Goss, Ph.D, Economics Professor at Creighton University stated, “Lower energy and grain prices continue to restrain growth in the rural economy.”

Source: Rural Mainstreet Index Creighton University

Source: Rural Mainstreet Index Creighton University

 

 

 

 

 

 

 

 

The farmland price index improved to 38.6 from 30.0 in November. The increase moves the index to just below levels reported in August. “Much weaker crop prices continue to take the air out of the bubble in agricultural land prices. This is the 13th straight month that the index has moved below growth neutral,” said Goss. Auction and private sales activity has increased as farmers have completed the 2014 harvest. Sale prices have “comeback to earth” relative to the irrational prices some pieces were fetching earlier this year, but good farmland is still selling for $10,000 or more per acre in some areas.

Source: Rural Mainstreet Index Creighton University

Source: Rural Mainstreet Index Creighton University

 

 

 

 

 

 

 

 

The farm equipment sales index increased to 23.7 from 18.6 in November. Continuing to rebound from an all-time survey low, farm equipment sales have been the area most affected by the fall in expected farmer income.

This month bankers were asked how they expected farmers to adjust their expenses to the likelihood of lower revenues. 63.6% of the respondents believe that farmers will cut back on equipment purchases. The next most common answer was cutting cash rents, which is surprising because most if not all of the rent conversation between landlords and farmers have been completed. Other common answers included waiting to see better seed deals and purchasing less fertilizer and chemicals.

Book1

Survey

This survey represents an early snapshot of the economy of rural, agricultural and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

Pain in Trains Falls Mainly on Grain

ONIDA, S.D.—The worst rail delays in more than a decade are impeding crop shipments in the Midwest, causing grain-storage facilities to fill up and sending pries for corn, soybean and soybean meal up sharply.

Congestion on railroad networks, now threatening to extend into a second year in the U.S. Farm Belt, is forcing some buyers to purchase additional soybean meal, used mainly in animal feed, to ensure a steady supply, analysts said.

That helped push futures prices up 11% in the past week. And soybeans and corn both jumped by around 7% as livestock and poultry operations in the eastern U.S. rushed to avoid feed shortages and speculators bid up the price of the commodities related to soy meal, analysts said.

MI-CG045_GRAINT_16U_20141102172105

“It’s panic buying,” says Charlie Sernatinger, global head of grain futures at brokerage ED&F Man Capital Markets in Chicago. “You have to feed these animals.”

The delays—the worst for the agriculture industry since 2002, according to Agriculture Department officials—have slowed business for grain companies in the upper Midwest that ship crops to customers who process them into feed and other products or export them overseas.

Analysts worry that unless railroad congestion abates, soybean-meal futures prices could march higher in the weeks ahead, potentially lifting some consumer prices for meat and other animal products. Any impact on baked goods or other processed foods in the U.S. is likely to be very limited, because grains tend to account for a small share of their prices.

For farmers who are able to ship their crops, last week’s commodity-price run-up offered a chance to sell at higher prices after an extended period of decline. Abundant summer rain this year nurtured what is projected to be the biggest U.S. corn and soybean crops in history. That has hammered prices: Even after last week’s surge, corn futures are down 11% since the start of the year at the Chicago Board of Trade, the main global marketplace for agricultural commodity futures. Soybean futures are down 20%.

But for other growers, the recent price gains may not help if they can’t get their product to market. At Oahe Grain Corp., a grain elevator in this central South Dakota town, business has nearly halted at what is normally its busiest time of year because railcars needed to pick up crops have been running about six weeks behind schedule.

The company’s 110-foot silver towers, with several holding hundreds of thousands of bushels of wheat, have been full for most of the past month, said Tim Luken, general manager for Oahe, which markets grain, sunflower seeds and other crops. Last week, Oahe ran out of space in its corn bins, too.

While Oahe waits for railcars to arrive, it can’t buy any more grain because there is no place to put it, Mr. Luken said. “Farmers call me every day … I’m telling people not to bring anything in.”

The rail snarls will cut grain-trading volumes to 8 million to 10 million bushels at Oahe this year, from 12 million to 15 million in a typical year, Mr. Luken said.

The transport problems are caused by several factors: Rail companies are experiencing an overall rise in demand to move goods, including consumer goods, crude oil from the shale fields of the upper Midwest, as well as increased grain from two years of bumper crops. Last year, an unusually harsh winter compounded problems by forcing shippers to run shorter, slower trains.

That overflowing demand has lifted profits for railroad companies such as BNSF Railway, owned by Warren Buffett’s Berkshire Hathaway Inc., and Canadian Pacific Railway Ltd. , the two primary railroads serving the upper Midwest. Canadian Pacific shares have soared 37% this year, while rival railroads CSX Corp. and Norfolk Southern Corp. have climbed 24% and 19%, respectively.

Rail companies have claimed progress in easing bottlenecks. BNSF earmarked $1 billion for expanded capacity along its northern U.S. tracks this year.

“We’re delivering consistently better performance than we did last year,” said John Miller, BNSF’s vice president of agricultural products, who said the biggest factor influencing grain shipment speeds this fall is the scale of the crop to be moved, rather than rail congestion.

MI-CG046_GRAINT_16U_20141102173634

Canadian Pacific is investing $500 million to help boost capacity and upgrade tracks in its U.S. network, Chief Executive Hunter Harrison told U.S. railroad regulators in a September letter. A spokeswoman said its fleet should be able to handle this year’s harvest, but “the entire grain supply chain must function efficiently in order for CP to continue our recent strong performance.”

A spokeswoman for CSX, which operates railroads across the East Coast, said the company is “putting all possible resources toward efficient grain service.”

A spokesman for Norfolk Southern, another major railroad operator in the eastern U.S., said “all traffic is being impacted by unexpected increased volume.”

Track congestion threatens profits for big agricultural traders and processors such as Archer Daniels Midland Co. and Cargill Inc. Logistics problems contributed to profit declines for the companies earlier this year, and Bunge Ltd. cited higher U.S. transport costs among its headwinds after its third-quarter results missed expectations last week.

Analysts expect railroad capacity issues to remain a challenge this winter, with J.P. Morgan Chase warning recently that higher freight costs and congestion will weigh on farmers’ crop prices and agricultural-processing profits.

The logjams have led grain companies to rely more on river barges to move goods, while others are looking at using trucks as a more expensive, but possibly more reliable, option. U.S. barge freight rates in the week ended Oct. 28 ran 60% higher than the past three years’ average, according to a USDA report.

Because grain processors and exporters face higher shipping costs for the crops they buy, grain elevators—the middlemen which gather crops from farmers for transport—are offering some growers in the upper Midwest sharply lower prices.

In South Dakota, some grain elevators are offering to buy corn for 70 to 80 cents below the December futures price, about double the normal discount of about 35 cents, according to Bob Metz, a farmer who grows corn and soybeans near Peever, S.D.

“It’s a huge hit to my balance sheet,” Mr. Metz said.

Futures markets reflect expectations for further snags. Contracts for the price of corn delivered next spring have climbed higher than December contracts. Traders say the move shows that commercial grain buyers are providing a financial incentive for farmers to store crops away for the winter rather than sell them immediately after harvest, partly due to anticipated shipping backlogs.

Corn for December delivery at the Chicago Board of Trade, the front-month contract, rose 0.7% on Friday to $3.7675 a bushel. That compares with higher prices for contracts for March ($3.8925) and May ($3.98).

The price difference “has a lot to do not just with the size of the crop, but the fear it’s not going to get loaded,” says Mike Zuzolo, president of Global Commodity Analytics & Consulting LLC.

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Billionaire Businessmen Buying Up Mega-Ranches

In a modern-day stampede, billionaire execs are buying ranches for the cattle operations, game-hunting—and to entertain clients and guests. It was a showdown in New Mexico earlier this year, as two billionaires, both from Fort Worth, Texas, battled it out to buy two enormous cattle ranches.

When the dust cleared, oil, gas and real-estate investor Bobby Patton, co-owner of the Los Angeles Dodgers, had won the 174,000-acre York Ranch, spending more than the $10.9 million asking price and outmaneuvering D.R. Horton , one of the country’s largest home-building companies. In a separate deal, D.R. Horton, founded by Donald Horton, outbid Mr. Patton for the nearby 292,779-acre Great Western Ranch, closing in July for around the asking price of $59 million.

The market for large ranches is on the rebound. The recession and droughts dampened demand for wide swaths of ranch land in recent years. Dry conditions forced ranchers to sell off their herds, creating a glut that drove down cattle prices. Now, with easing drought conditions across much of the country and higher cattle prices, ranches that had been sitting on the market have started to sell. A boom in the oil and gas industry and current 2% interest rates on ranch mortgages are also fueling big land grabs.

“It’s the perfect storm,” says Sam Middleton, a Lubbock, Texas-based ranch agent who is representing Waggoner Ranch. With 510,000 acres across six counties in Texas, Waggoner Ranch is one of the largest ranches ever to go on the market. The heirs of Texas cattle baron W.T. Waggoner listed it just a few weeks ago for $725 million. Mr. Middleton and Briggs Freeman Sotheby’s International broker Bernie Uechtritz say “hundreds” of interested buyers have called about the property.

Demand is particularly strong right now for mega ranches—those with over 25,000 deeded acres and often more than 100,000 total acres listed in the $10 million to $175 million range. Deeded acres are more desirable because they’re owned outright; ranches may also include acreage leased from the state or federal government, which allows them to graze their cattle in exchange for a fee. These properties typically have cattle operations, as well as recreational assets such as hunting, fishing or hiking. Some listings include mineral rights in the sale, which offers potential revenue from oil, gas, uranium, coal or other resources.

Hall & Hall, a ranch real-estate agency that listed both the York and Great Western ranches in New Mexico, says a substantial part of its $1 billion-plus in ranch sales since 2012 has come from these larger properties. The firm has sold seven ranches bigger than 25,000 deeded acres since 2011, three times the number it sold in the previous four years.

Buyers of these mega ranches are looking for income, such as a profitable livestock operation or fees from allowing wildlife-hunting, says Jeff Buerger, a Denver-based partner with Hall & Hall. More important, they are looking for a safe, long-term investment. The value of U.S. pasture land normally grazed by livestock rose 11% in the fiscal year 2014, which ended in September, from a year earlier, after averaging about 5% yearly increases for the two years before that, according to the U.S. Department of Agriculture.

In a statement from D.R. Horton, the company said the purchase of Great Western Ranch was a “long-term investment, with no immediate plans for development. It will remain an active ranch operation and be made available for use by our key employees.”

Michael Hewatt, a member of the D.R. Horton board, says the company will use it much like it does the two large ranches it owns in Texas: as a place to entertain brokers, bankers and other D.R. Horton vendors. “It’s a perk for the people we work with,” he says. He also says the ranch is a “good investment for the long term.” Mr. Horton has also personally purchased large parcels of ranch land in Texas and New Mexico, according to public records.

Mr. Patton is more likely to use York Ranch for entertaining than for raising cattle, says Thomas G. Fitzgerald, one of the sellers. Mr. Fitzgerald says the cash flow from the cattle was “insignificant” in comparison to the value of the land. There’s also some potential hunting revenue, from $25,000 to $40,000 a year. The ranch, which has elk, mule deer and pronghorn antelope, is allocated about 14 big-game tags—which signifies the number of animals that can be harvested. A three-bedroom, two-bathroom main house and a small airplane hangar with two landing strips came with the sale. It is very much a working ranch—it’s nothing fancy, says Mr. Fitzgerald. Mr. Patton declined to comment on his plans for the ranch.

A major ranch purchase also comes with bragging rights. Many of the bigger properties are known as “legacy” ranches in part because buyers want to stake their claim in history. These ranches stand out for their size, unusual location or a unique feature, says Eric O’Keefe, editor of the Land Report, which publishes an annual ranking of the largest 100 private landowners in the country. To make that list requires owning 100,000 deeded acres or more.

Billionaire Stan Kroenke, who owns the St. Louis Rams and is majority owner of soccer’s Arsenal F.C., bought a roughly 124,000-acre ranch in 2012 near Augusta, Mont., listed for $132.5 million by the estate of William and Desiree Moore, the late co-founders of Kelly-Moore Paints. Called the Broken O Ranch, Mr. Kroenke’s purchase elevated him on the Land Report’s list of largest landowners, where he currently holds the No. 9 spot. Mr. Kroenke didn’t respond to a request for comment. Liberty Media Chairman John Malone remains at the No. 1 spot on the Land Report’s 2014 list, with 2.2 million acres. Mr. Kroenke didn’t respond to a request for comment.

Much of the action is in New Mexico. Unlike Texas and Colorado, the state still has quite a few very large properties that haven’t been broken apart. Real-estate agents estimate that New Mexico has about 30 ranches bigger than 100,000 acres of deeded land. Land prices are lower, too. New Mexico ranch land sells for $200 to $300 per acre, compared with as high as $1,000 an acre in Wyoming, Montana and elsewhere.

Ben Scott of Dimmitt, Texas-based Scott Land Co. is representing a 109,000-acre Double V ranch near Roswell, N.M., listed for $26.2 million, or $240 an acre. Double V first went on the market in 2009 but didn’t sell. It was relisted in the spring of 2013 and is currently under contract.
Caleb Matott, also a Texas-based ranch real-estate agent, in August sold the 35,000-acre Red Bluff Ranch, listed for $7 million, near Roswell, N.M. The buyers were Mr. Horton and his wife, Martha, personally—not by the company, according to public records. In marketing the ranch, Mr. Matott stressed the legacy value of the property: “To stand on the same ground that John Chisum, John Tunstall, Billy the Kid, Pat Garrett and so many more have stood, makes a man walk with a little higher step in his stride. To own a ranch of the grandeur makes a person part of history.”

Mr. Patton has another property in New Mexico: He and Mark Walter, the Chicago financier who is also a co-owner of the Dodgers, bought the 93,403-acre Double H ranch in west-central New Mexico last year through Double H Holdings LLC, which was used to buy the York ranch. The sale price isn’t public, but the Rocky Mountain Elk Foundation, a habitat-protection organization that owned the ranch, earned at least $30 million in the deal, according to Blake Henning, vice president of lands and conservation for the Rocky Mountain Elk Foundation.

Vast ranch holdings by a few individuals can cause deep resentment in the community, Mr. Henning says. Since private landowners either ban the public from hunting on the land or use outfitters to sell expensive hunts, local hunters often complain, he says.

That resentment won’t go away soon. Competition for recreational ranches, particularly by owners of thriving oil and gas companies, has picked up. There’s a shortage of supply now of the largest properties, which tend to go to the same small group of investors. “There’s a finite group of potential purchasers. We are all aware of them and what their appetites are,” says Greg Fay, founder of ranch brokerage firm Fay Ranches.

Corrections & Amplifications
Great Western Ranch closed in July for around the asking price of $59 million. A previous version of the story said the ranch had sold for more than its asking price. Also Stan Kroenke is the majority owner of soccer’s Arsenal F.C., not the sole owner. (10/27/14).

2014 Pheasant Outlook

The South Dakota Game, Fish and Parks (GFP) has completed the annual pheasant brood survey and the results show a 76 percent increase in the statewide pheasant-per-mile index from 2013.

From late July through mid-August GFP surveyed 109, 30 mile-routes across the state to estimate pheasant production and calculate the pheasants-per-mile index. The survey is not a population estimate, but rather compares the number of pheasants observed on the routes and establishes trend information. Survey routes are grouped into 13 areas, based on a local city, and the index of each local city area is then compared to index values of the previous year and the 10-year average.

“With favorable weather conditions this past winter and spring, along with the availability of quality nesting habitat across the state, we are going to see an increase in this year’s pheasant population” stated Jeff Vonk, GFP Secretary. “Survey results show pheasant numbers rebounded the strongest in central South Dakota; especially in the Pierre,

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Chamberlain, Mobridge and Winner areas. Results also indicate that pheasant numbers are substantially higher than 2013 throughout much of eastern South Dakota.”

The 2014 statewide pheasants-per-mile index of 2.68 is up from 1.52 in 2013. The statewide pheasant-per-mile index is similar to 2002 when hunters harvested 1.26 million roosters.

No Crash in U.S. Farmland Despite Tumbling Grain Prices

Published by Colvin & Co, LLP (September 9, 2014)

(Reuters) David Fullington paid a “ridiculous” price of $13,600 an acre for a 200-acre (81 hectares) farm in Illinois within the last year and says he and his partners would probably bid again for prime land that is in tight supply, despite tumbling grain prices.

“No regrets at all,” Fullington said of the purchase of his neighbor’s land, now farmed by a son of one of his partners. “Very seldom do you get an opportunity to buy something right next door to you. There’s always a little extra value there for you.”

In the 1980s, sharp falls in corn and soybean prices hit farm incomes hard and land prices tumbled, hurting the rural economy in the world’s biggest grains producer. The pain spilled into the financial sector as defaults on loans pegged to farmland values rose.

U.S. policymakers and bankers had feared a repeat this year, but instead, U.S. farmland prices are already up 8 percent as of Aug. 1 according to the U.S. Department of Agriculture (USDA).

They expect values – especially for prime farmland – to hold near record highs even though corn and soybeans are at four-year lows.

The reason? Farming families like the Fullingtons have money from recent boom years to invest into assets they think give long-term value. Levels of debt are also lower than in the 1980s.

And after five years of record grain prices, led by corn on the back of booming biofuel demand, and export demand led by China, farmers have enough wealth to weather this fall. All time-high harvests that triggered the slide also provides a cushion as there are more crops to sell.

Government crop insurance programs, boosted again in the latest five-year farm bill signed in February, have also given grain farmers added protection.

New demand is coming in too. Livestock producers are seeking more grazing land as they rebuild herds after years of drought and are benefiting from record cattle prices.

“The agricultural sector has been highly profitable so you still have a lot of money out there, a lot of wealth,” said Nathan Kauffman of the Kansas City Federal Reserve, who oversees the bank’s quarterly survey of Plains crop land prices, which are up 6 percent this year.

DODGING THE TSUNAMI

Farmland acts as the main collateral for farm loans and amounted to $2.45 trillion or 85 percent of farmer assets in 2014, up from 79 percent in 2010, according to the USDA’s latest data. In the same period, land asset values for farmers rose 35 percent, extending a decade-long climb, interrupted only briefly in 2009 during the global financial crisis.

“I think the good properties will sell this fall,” said Jim Farrell, head of Farmers National, the largest U.S. farm management company and top auction house in the country, based in Omaha, Nebraska.

He said spring auctions saw 90 percent of properties sold on the day of auction and 95 percent in the same week.

“I don’t see that deteriorating a lot,” Farrell said.

Just two weeks ago, a farm in the country’s top crop state of Iowa fetched $14,100 per acre – just below last year’s record when corn prices were much higher, according to Randy Hertz of Hertz Farm Management in Nevada, Iowa.

“That really surprised me how strong that was,” Hertz said.

Farmland auctions take place throughout the year but autumn is the busiest season as crops are harvested and the end of the tax year looms.

Farmers make up the bulk of buyers, both to work the land themselves and as an investment to be managed or rented out.

An Iowa State University study in January showed farmers made up 80 percent of buyers of farmland in the top corn and soybean growing state, 18 percent were investors – including farmers buying land to be managed – and the remaining 2 percent were other buyers such as churches and non-profit groups. Iowa does not allow big corporations or partnerships to own land, with most farmland owned by couples or individuals.

“People talk about institutions investing in farmland but we are still a small fraction of what is happening in the marketplace,” said Jeffrey Conrad, head of investment firm AgIS Capital which advises farmland buyers and hedge funds.

Financial investors have generally been more cautious this year because of the fall in grain prices and the prospect of higher interest rates, which would make borrowing to buy farmland more expensive. But many retain a long-term bullish outlook for U.S. grain and meat as world demand, led by China, looks set to keep rising.

“You’ll definitely see downward pressure, clearly 5-10 percent you could see,” said Conrad, adding that most investors were waiting on the sidelines and while there could be some softening he expected no crash in months ahead. “If you saw any real downward pressure on values, there’s enough capital on the sidelines to support it. They will come back into the market if the values start to fall.”

Fullington said he and his partners were not ignoring lower crop prices or the outlook for interest rates to tick higher in the next 12 months as the Fed trims its bond buying.

“But that’s short term,” he said. “In the long-term personally I think there’s no better investment than farm land.”

http://www.reuters.com/article/2014/09/07/usa-farmland-values-idUSL3N0R565R20140907