What is in this article?:
- Soaring farmland prices: potential bubble or a good investment?
- Diversity offers unlimited possibilities
- Yield and production capability
While land prices in the Mid-South haven’t attained the stratospheric levels of those in Iowa and California, they have nonetheless seen good appreciation, says George Baird, owner/operator of Baird & Brunson Land Management Group LLC, Collierville, Tenn. “In the past 12 months, farmland prices in our region have continued to climb,” he says, “with increases being reported between 6 percent to 15 percent.
Diversity offers unlimited possibilities
“The diversity of the land throughout the Delta gives unlimited possibilities. Integration of land development and irrigation and adoption of the latest technologies, ranging from equipment to new varieties, ultimately allow us to increase efficiency, maximize yields and increase returns. This is being recognized by people on both a local level and national level as they realize we have the capability to compete agriculturally with any region of the U.S. and the world.
“Outside investors are looking to our area as a way to diversify their portfolios and take advantage of recent trends. Compared to an area like the Midwest, it is much easier to put together sizable tracts of land, whether to continue to cash lease them out or to introduce some type of custom operation into the mix.
“When you look at the production capabilities of our land and its cropping flexibility,” Baird says, “then consider how production agriculture has evolved in the Mid-South in the last 10 years and where the next 10 years might take us, I still contend Delta farmland is relatively undervalued in today’s market compared to other regions of the country.
“That’s not to say it’s a cakewalk here — production risks will always exist — but the opportunities often outweigh those risks when a long perspective is taken.”
While the Fed chairman, the president, and others maintain the recession is over, Baird says, “Many others worry that we could see a relapse in the economy, and they are looking to farmland as a hedge against current uncertainty and future inflation.
“If we look back at total return over the last 45-plus years, farmland as an investment has outpaced inflation and the S & P index. Adding to the bullish sentiment for agriculture is a growing world population, increases in per capita protein consumption, and dwindling supplies of commodities as a result of production problems in the last several years due to drought, floods, earthquakes — all at a time when demand is increasing.”
Despite an ever-increasing level of uncertainty and volatility, opportunities for increased profitability are also bringing newcomers into agriculture, Baird says.