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Senior Contributor

Land values & optimism

Just wrote up a quick story on a study out today over in Illinois about land values there. The climb's sharp -- not as sharp as in some neighboring states -- at around 20% to 21% for most all categories of land. And, one major implication of that climb is that farmers in that state generally feel solid incomes will stick around for at least another year, thereby making it easier to bid more for land with the assumption that a guy can make enough money to cover it in the future. 

 

So, what do you think? Do you feel as optimistic about your future profitability in, say, the next 5 years as it's been in the last 5 years? 

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9 Replies
Senior Contributor

Re: Land values & optimism

  Last September there was a family/group that had over 11,000 acres in 2 counties for sale, and the article about the seller mentioned that he was also on the board of a local bank that has a regional chain. One tract was offered for sale at $11,000 per acre in Dekalb County, IL. and the last I heard it was up to $12,000 per acre. He spooked a lot of people by putting up so much land for sale, mainly because it's only guys in positions similar to him that could swing the deal, and the fact that he's on a bank board and might know something that's coming and is trying to unload. 

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Honored Advisor

Re: Land values & optimism

I have often wondered how much of a dampening effect the actions fo one particular investor or operator can have on everyone within earshot.  You would have to wonder about a guy in that position backing out. 

 

While it can be a personal reason like health - his, or in the family - you have to ask yourself if it could be a wider trend he's reading.  I learned a long time ago that money is the ast taboo...people will talk abour their sex life before their bank balance.  A lot of people who you think are flush with cash simply aren't....

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Veteran Contributor

Re: Land values & optimism

Tell me what the corn price is in five years and I'll tell you my thoughts on land prices.  While you're at it, I'd like to know what interest rates will be.  Those are the two most important factors regarding land prices.  Since I doubt that interest rates will go up considering that the housing market couldn't stand a rate increase, especially in Illinois, land prices will stay solid or increase the next couple years.  We seem to have buyers for the higher grain prices so there is little reason for land prices to fall.

 

However, we are only two pieces of three inch steel 1500 miles long from crop prices dropping like a rock.  If Brazil could ever get a railroad from north to south grain acres from that neck of the woods could increase dramatically.  I know they've talked about it for a decade but these high prices could provide motivation to start the ball rolling.  The Brazilian  political climate is a nightmare (hard to believe anything could be worse that what we've witnessed here lately) and might not improve soon.  China buys 70% of the soybeans Brazil exports so they might provide the push considering they have the demand and the ability to make it happen. 

 

So if Brazil ever gets its act together these high land prices could be a distant memory. 

 

Another variable to consider is the possibility that the estate taxes might not get changed, meaning  a  lot more land could be on the maket when the heirs get a bill from the IRS.  If you haven't noticed, the government it rapidly running out of money and no one has even suggested cutting spending or raising taxes, so they might need to get the money somewhere.  Don't be surpised if the estate tax laws do not get changed. 

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Senior Contributor

Re: Land values & optimism

  I wish that I could paste the article here but it was too long ago to retrieve it without a subscription. In that article though, the man specifically said it was due to record land prices and not missing out on that opportunity. Some simple reading between the lines meant that he thought that prices for land and commodities wouldn't last too much longer into the future. His bank affiliated position gave his position a tinge of some type of insider information in regards to the finance end of things.

  But, only a few people with direct and inside knowledge of his finances know his debt situation also. I could go to the library and look up the article and track down the transaction at the courthouse as I have to submit some plans for approval there in awhile. I'm curious to see if any of his land sold, and to whom and for what prices.

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Senior Contributor

Re: Land values & optimism

  So if Brazil ever gets its act together these high land prices could be a distant memory. 

 

  That idea has been discussed with some of the investors that I've spoke to in regards to land investment, with a specific investor from Omaha that's already heavily invested in railroads now. They seem to think that there's more growth or long-term profit potential in that type of investment. The gist of farmland investment is that it's too late because prices are at or near peak, along with long-term returns or trends. Housing has better and steadier returns over a long period averaging from 8%-13%, excluding short-term roll overs.

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Honored Advisor

Re: Land values & optimism

Generally, we can only tell the reported sales amount by factoring from the tax stamps charged for recording the transferred title. I bowled someone over with that simple nowledge once...you would think people realize there is no such thing as privacy. 

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Advisor

Re: Land values & optimism

I agree.  And, there are some people you might think to be cash poor but are quite well-to-do.  While a college student, I worked for a brief time in a bank in Denver.  My employee/mentor pointed out a poorly dressed elderly man who deposited some money.  She said, this man could write a check for any amount, and the bank would honor it.  The guy looked like a hobo from the thirties.  It could have been a disguise, but she said he always dressed like that.

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Honored Advisor

Re: Land values & optimism

There are a lot of those under-the-radar types around.  I think there is a happy medium...that having a pile of money and looking like a ragpicker is your right, but deprivation in the name of thrift can be just plain stinginess.  It takes all types to make a world....

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Senior Advisor

Re: Land values & optimism

Be aware that some folks think that accumulation is fun. Warren Buffet likes playing the game and he certainly could choose another passion, 

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