The American Society of Farm Managers & Rural Appraisers (ASFMRA) has released their 2019 Mid-South Land Values and Lease Trends Report, and with it, a wealth of information that can help guide agricultural land purchases in regions across Arkansas, Louisiana, Mississippi, and Tennessee.
So what is there to learn from the report? Here are four of the biggest takeaways.
#1: Quality Midsouth farmland continues to be limited
One of the biggest problems facing Midsouth agricultural land investors is that large-scale, quality plots — think 1,000 to 3,000 acres — have been hard to come by. Institutional investors have, for the most part, replaced individual investors and farmers in the purchase of investment-grade Midsouth farmland, notes W. Stacey Gillison, Current Midsouth Chapter President. This is due in part to the increased risk of land flipping driven by trade wars, rising interest rates, and stagnant land value levels. While it doesn’t mean that sales have come to a halt, it does mean that “the Delta flipping days are over,” Gillison says.
#2: The 2018 Farm Bill was good news for Midsouth farmland
The 2018 Farm Bill “could help insulate Midsouth farmland prices,” according to the report. This is thanks to a number of safety nets provided by the bill, including maintenance of the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs — both of which were holdovers from the 2014 Farm Bill. There are still some issues to contend with (most notably shifts in agricultural trade policy), but as the report states, “there are reasons to be optimistic that farmland valuations could hold firm in the year ahead.”
#3: In Arkansas? You may want to invest in grain land
Local and institutional investors in Arkansas — and in particular in Arkansas Region 2, which consist of the northeast counties in the state — are encouraged to invest in grain. That’s because, as the report notes, the poultry industry in the area is expanding, and with it, the need for grain feed. A “significant portion” of this grain is purchased locally,” the report says, which means big things ahead not just for the crop itself but the land that’s used to grow it.
#4: Timber is on the up and up, but not all Midsouth states are ready for it
In a piece included in the report titled “The Future of Forestry in the South,” Tedrick Ratcliff, executive vice president of the Mississippi Forestry Association, writes that there’s a growing need for mass timber production in the region due to increases in wood construction and advancements in wood-building technology. And while that’s good news for forest investors, some states have yet to rebound from the hit of the recession on their timber infrastructures — Mississippi in particular. That means issues meeting demand, but also opportunity for investors looking to get into the game.
Overall, the 2019 report had many messages of hope. Not much has changed in terms of land values and lease trends in the past year, and that’s actually a good thing — stagnancy is always preferable to declines, especially when it comes to agriculture. As the U.S. economy grows, so too should the agricultural sector, Gillison says. So what should investors do now? “Batten down the hatches,” he says, “and try to persevere through the trade negotiations.”
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