Search Site   
News Stories at a Glance
Deere 4440 cab tractor racked up $18,000 at farm retirement auction
Indiana legislature passes bills for ag land purchases, broadband grants
Make spring planting safety plans early to avoid injuries
Michigan soybean grower visits Dubai to showcase U.S. products
Scientists are interested in eclipse effects on crops and livestock
U.S. retail meat demand for pork and beef both decreased in 2023
Iowa one of the few states to see farms increase in 2022 Ag Census
Trade, E15, GREET, tax credits the talk at Commodity Classic
Ohioan travels to Malta as part of US Grains Council trade mission
FFA members learn about Australian culture, agriculture during trip
Timing of Dicamba ruling may cause issues for 2024 planting
   
Archive
Search Archive  
   
Illinois firm seeks farms to buy, back-lease

By TIM ALEXANDER
Illinois Correspondent

PEORIA, Ill. — A Chicago-area investment firm is seeking farmers and investors willing to enter into partnerships that would relinquish ownership of the farms to the investors, while retaining the farms’ past owners in a back-lease agreement that allows them to continue to operate their properties and share in their profits.
Midwest Farmland Partners (MFP), headquartered in Lisle, Ill., is working on consolidating family farms in order to ensure their survival, according to a recent company news release.

The firm plans to acquire family farms through partnership agreements that would manage and protect the interests of its members as a group.

Under its structuring, farmers would receive cash and limited partnership interests as payment for their farms and would continue to live on and work the same farmland.

“This is a great option for farmers who want to partially cash out, but who still want to maintain a financial interest in their farm,” said Nicholas C. Hindman, chief financial officers and general partner for MFP.

MFP points to a study by Dr. David Pimentel at Cornell University, which warns that by 2050, only 0.6 acres of farmland may be available to grow food for each American, as opposed to the 1.8 acres per capita available today. It is estimated that at least 1.2 acres per person is required in order to maintain current U.S. dietary standards.

If the prediction rings true, farmland and crops will increase in value and price as demand soars – an attractive proposition to investors with an eye on the future.

“The farmers’ products are more necessary to life than oil,” said Hindman. “While the oil companies have made record profits due to scarcity, why shouldn’t Midwest farmers profit from scarcity as well?”

Ray Brownfield, past president of the American Society of Professional Farm Managers and Rural Appraisers, said the findings of the Cornell study could have merit.

“The theory is that if the world population continues to expand at the rate it is, and considering the amount of land taken out of production for development, there could be more pressure on the supply,” he said. “Even though we’re in a downside economy right now, the world is consuming higher nutrition-valued foods – for instance, China has become a tremendous importer of pork products, and livestock, meats and food grains will continue to grow. Cornell has a concept that may be of some value.”

Brownfield indicated he didn’t expect many Midwestern farmers to scramble to take MFP, or other similar investment groups, up on the offer to relinquish ownership of their operations, even as other financial sectors suffer from the economic downturn.

“Farmers are competitors right now in purchasing land, and they will continue to be as long as they remain financially sound,” said Brownfield, who today makes his living as an agriculture real estate broker who offers professional farm management services. “I don’t see the farmers in so much distress that they’re going to want to sell to a partnership group and turn around and want to do a lease-back.

“The farm market is still quite stable – not quite as strong as it was over the past five years – but still very stable. Some investors are coming in as well because they see this is a good time to be in farmland, versus the stock market and other things.”

MFP points to the predicted scarcity of agricultural products by mid-century as a prime motivator for investors to come aboard. World grain production is already at peak levels, due in large part to advances in seed technology and unusually good weather in most of the world this past year, according to MFP’s news release.

“Despite this good fortune, demand has outpaced production for more than a decade and reserves remain low. If experts are correct, the world will consume more grain than it produces, on a permanent basis, in only a few short years,” according to MFP.
Brownfield said he doesn’t necessarily agree that a crop and food shortage is inevitable, saying the study may not have given enough credit to emerging genetics that could potentially increase crop yields by up to 50 percent in the same time frame. He also pointed out that just a couple of years ago, bad weather globally put a temporary strain on food supplies.

“Globally, we’ve had some poor weather in Europe, Asia and some parts of South America that caused less than normal production. Our export of grain was tremendous during that period of time due to the low value of the dollar and increased need. A lot depends on global weather,” said Brownfield.

“The technology we currently see in genetics is only going to get better and will be able to counter some of the risk due to weather. And we now see land that at one time was considered to be average to below average, with productivity at levels that would have at one time been regarded as that of highly productive ground.

“I think production will increase globally due to genetics, but can it keep up with the global population? That’s the big question,” he said.

Brownfield acknowledges that investment opportunities in farmland presented by firms such as MFP are solid.

“It’s not a slam dunk, but trend lines would tell you that land – particularly good farmland – will continue to be a great investment.
They’re not making any more of it, as the saying goes. It’s an asset that will continue to have great value,” he said. “We’re going to go through some economic times when land values may be slightly diminished, but overall the trend line will continue to be up over the years to come.”

Farmers and investors interested in learning more about MFP can visit its website, www.midwestfarmlandpartners.com

4/15/2009