8 Farmland Ownership Trends to Watch

Land Ownership Trends

A wide array of farmers, landowners, ag policy makers, lenders, and real estate investors met in early June to take a look at the current farm trends happening across the nation, and how US Ag Policy may need to adapt as a result of these changes. The meeting, hosted by the Farm Foundation, Bank of America/Merrill Lynch, and the USDA’s Economic Research Service, honed in on 8 specific trends that are shaping ag ownership trends not only across the US but for Nebraska farmland as well.

Trend 1: Overall, experts and farmers agree: Cash rent reductions are on the horizon. The current grain market situation is set to lower cash rents an additional 5 to 15 percent, according to farm economists.

Trend 2: Remember talk of land bubbles? Ag economists at the meeting held firm in their opinion that, despite softening farmland prices, most US farmers are in good shape, equity-wise, to deal with them. That’s not to say that situations are rosy across the board. According to ag economist and director of the University of Illinois’ TIAA-CREF Center for Farmland Research, the average debt-to-income ratio is still 6.8 to 1—levels nowhere near the levels experienced during the 1980s bubble burst, but still “storm warning level.”

Still, farmland is still seen as one of the highest-returning, safest investments, and indeed, with a 30 year average 10.5 percent rate of return on Iowa farmland, compared to just 8.17 percent for S&P 500, that seems like an accurate assessment.

Trend 3: While the land market is ripe for investors, nationwide there has been very little outside investment in agriculture, with 99 percent of farms and 90 percent of production resulted from family-owned farms.

Trend 4: A shift in ownership structures is occurring. Sherrick is seeing more separation of operators and ownership. Larger farms are taking on more complex business structures, and many operators are becoming multi-generational—a trend that will make it more difficult for federal programs and ag policy makers to define “farmer.”

Trend 5: An age disparity is being noted between farm owners and farm operators. While the average age of farm operators isn’t rising much, the average age of landowners is.

Trend 6: Similarly, the age of beginning farmers isn’t necessarily young. According to Jeffrey Hopkins of USDA ERS, older beginning farmers are the biggest portion of beginning farmers.

Trend 7: From an ag-policy stance, the next farm bill may be drastically different, with the potential for cotton to be replaced by soybeans as a core commodity. Soybeans have grown faster in acreage as well as in farm revenue than cotton in both the North and South.

Trend 8: The Farm Bills recently issued continue to shift focus to conservation, environmental concerns, crop insurance/risk management, and food/nutrition programs. According to extension ag and consumer economist at the University of Illinois Jonathan Coppess, “We need to find ways to expand the farm policy coalition to get favorable farm policies.” He hopes that the focus of the next Farm Bill will be redirected somewhere to the middle, instead of continually shifting left.

Do you have questions about ways to stay ahead in the current agricultural landscape? Feel free to contact a UFARM representative—we are glad to help you put together a plan of action that works for you.

Source consulted:  Vogel, John. “8 Farmland Ownership and Ag Trends Impact Future Farm Policy.” FarmProgress.com. Penton. 14 Jun. 2016. Web. 28 Jul. 2016.

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Nebraska Farmland Owner Survey Results

Nebraska Landowners

Last year, the USDA’s National Agricultural Statistics Service (NASS) conducted a survey of all landlord owners of agricultural land in the US. The survey, called the 2014 Tenure, Ownership, and Transition of Agricultural Land (TOTAL) Survey, was the first of its kind done by NASS since 1999.

The purpose of the survey was to provide updated information on land ownership income, expenses, debt, assets, and demographic landlord characteristics, in addition to survey questions addressing current farm issues. The results are representative of all agricultural land held by both operating and non-operating landlords in the contiguous 48 states.

The results provided a wealth of new information on landowners in Nebraska and across the nation. In Nebraska, 20.1 million acres of farmland are rented. There are 69,112 farmland landlords in the state, and of these, 11.864 are farmers, while 57,248 are non-farming landlords.

Some of the other TOTAL noteworthy findings include:

  • 39 percent of all U.S. farmland is rented or leased
  • 80 percent of all rented farmland is owned by non-farming landlords
  • Rented farmland is valued at $1.1 trillion in total
  • 91.5 million acres of farmland (or about 10 percent) are slated for ownership transfer in next 5 years
  • only 21 million of these acres are expected to be sold to a non-relative.

Of these results, more than half of the farmland rented out by non-farming landlords was inherited. Of those landlords, 87 percent indicated that they are not currently farming. These results are fairly consistent with the results of the 1999 survey, indicating that rental trends have stayed relatively the same. Similarly, results such as those above are not necessarily surprising, as rented farmland is often owned by family members who have received land as part of an inheritance and hold no farming interests themselves. Similarly, many of these rented acres are owned by retired or widowed farmers who are no longer able to farm the land themselves.

Along this line, the survey results indicated that, on average, farmland owners are older than farmers, with the average age of farmers in the US being 58.3, compared to 66.5 for landlords, or non-farming owners of rented ground. Overall, more than half of principal landlords were age 65 years or older, at 57 percent. 18 percent were under 55 years old.

Perhaps the most noteworthy take away from the survey is what this means for the next generation of farmers, and raises important questions regarding the transfer of rented farmland over the next two decades. According to the survey, landowners in Nebraska reported that they expect to transfer 4.45 million acres to different owners in the next five years. Of these, 362,462 acres are expected to be sold to non-relatives, while 445,253 acres are expected to be kept in the family.

As such, new prospective farmers will continue to face challenges in finding acres to buy, with few farmland acres available.  Our UFARM Land Managers can assist landowners, farmers and ranchers when looking for ways to lease, buy or sell land – contact us today!

Source consulted: “Who Owns US Farmland, and How Will it Change?” National Sustainable Agriculture Coalition. National Sustainable Agriculture Coalition. 18 Sep. 2015. Web. 30 Dec. 2015.

Who are Nebraska Farmland Owners?

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After a decade of burgeoning land values, it appears as though the price of land is leveling off. While the factors that led to such pricey acres across the state of Nebraska and the entire Midwest are varied, it’s also an interesting exercise to explore the demographics of the average land owner. Who owns Nebraska farmland? If prices continue to level off and perhaps even decrease, will this have an effect on those demographics?
The USDA conducts a land ownership survey every ten years that seeks to answer these types of questions. Due to budget cuts, the 2009 survey was postponed. However, looking at the previous survey’s findings sheds some light on who owns the bulk of Nebraska farmland.
There continue to be two main types of landowners, according to a research article by University of Nebraska-Lincoln Ag-Econ professor Bruce B. Johnson. The first are owner operators (farmers and ranchers) who operate at least some of the land they own, and the second are non-operator owners (landlords) who rent all of the land they own to others to farm.
Of these two groups, in Nebraska, the owner operators just barely edged out the landlords by a margin of 52.1 to 47.9 percent. In his study, Johnson also found that 15,000 of the owner operator class also rent out some of their owned land to others. As a result, nearly 55 percent of all agricultural land in Nebraska was being rented out by its owner at the time of the last USDA survey.
Another interesting discovery reveals that, despite edging out the landlord class in acreage, the type of land owned by landlords tends to be cropland—54 percent as contrasted to 45 percent—and thus higher in value. Conversely, over half of the owner operated base is pasture, compared to less than 42 percent of the landlord land. Consequently, landlords own relatively higher-valued land, and in total, held nearly 54 percent of the total value of agricultural real estate in Nebraska.
As far as leasing patterns, the last USDA survey found that, of the ground that was being rented, 41.9 percent were cash leases, 41.7 percent were share leases, and the remainder a cash/share combination. Over time, the trend has been a shift from share to cash leases, and even more to flexible lease agreements. While cash leases comprise the majority of pasture rental agreements, cropland rental agreements at the time of the survey were cropshare, 58 percent; cash, 41 percent; and other, 1 percent.
Finally, Johnson’s study found that the rental market was comprised of more than 63,000 landlords and 34,000 tenants. Of the landlords, there are those who rent out to others all of the land they own, as well as those owner-operators who also rent out (to others) at least some of the land they own. Of the tenants, some were full tenants who only operate land rented from others, while the rest it also includes part-owner operators who farm at least some rented agricultural land as well as land they own themselves. In short, both classes are wide-ranging and varied.
It will be interesting to see what the next survey finds in light of the high priced commodities and land values that characterized the last several years, and their subsequent leveling off.

Source Consulted: Johnson, Bruce B. “Agricultural Land Ownership and Tenure Patterns in Nebraska.” DigitalCommons@University of Nebraska – Lincoln. University of Nebraska-Lincoln Agricultural Economics. 01 Jan. 2003. Web. 03 Jun. 2015.