Land to Buy!

Have you been thinking about buying some land?  We have some deals for you in both the states of Kansas and Missouri.  Whether you're interested in buying at an auction or private treaty there are plenty of deals available with great returns on your investment.  Click on the links below to find the perfect land for you.

240 Acres Miami Co. KS

70 Acres Miami Co. KS

23.5 Acres Miami Co. KS

110 Acres Leavenworth Co. KS

160 Acres Johnson Co. KS

40 Acres Miami Co. KS

103 Acres Daviess Co. MO

42 Acres Daviess Co. MO

80 Acres Daviess Co. MO

139 Acres Miami Co. KS

500 Acres Johnson Co. MO

169 Acres Cass Co. MO

100 Acres Barton Co. MO

391 Acres Morris Co. MO

65.3 Cass Co. MO

Interested in a greenhouse operation?  Click on the link below.

Greenhouse =+ 10 Acres Cass Co. MO

Depressed Prices Ups Farmers Hedging

What do farmers need to keep in mind about the futures market?  Let Dave Leheman, CME Group Managing Director of Research and Product Development, tell you.  Here's a short video from an interview by Agriculture.com.

Disaster Assistance

The 2014 Farm Bill, formerly known as the Agricultural Bill of 2014, makes the Livestock Forage Program (LFP) and Livestock Indemnity Program (LIP) permanent programs and provides retroactive authority to cover eligible losses back to Oct. 1, 2011.

LFP provides compensation to eligible producers who suffered grazing losses due to drought and fire.  LIP provides compensation to livestock producers who suffered livestock death losses in excess of normal mortality due to adverse weather and attacks by animals reintroduced into the wild by the Federal Government or protected by Federal law, including wolves and avian predators.

USDA is determined to make implementing the livestock disaster programs a top priority and plans to open program enrollment by April 15th, 2014.

As USDA begins implementing the livestock disaster assistance programs, producers should record all pertinent information of natural disaster consequences, including:

• Documentation of the number and kind of livestock that have died, supplemented if possible by photographs or video records of ownership and loss.
• Dates of death supported by birth recordings or purchase receipts.
• Cost of transporting livestock to safer grounds or to move animals to new pastures.
• Feed purchases if supplies or grazing pastures are destroyed.
• Crop records, including seed and fertilizer purchases, planting and production records.
• Pictures of on-farm storage facilities that were destroyed by wind or flood waters.
• Evidence of damaged farmland.

Many producers still have questions.  USDA is in the process of interpreting the Farm Bill program regulations.  Additional information will be provided once enrollment period is announced.  In the meantime, producers can review the LIP and LFP fact sheet.  The USDA is working dilligently to put the Farm Bill programs into action to benefit the Farmers and Ranchers of rural America.

Types of Property Ownership

Most Common is Joint Tenancy

The number one form of land ownership we see is called joint tenancy.  Joint tenancy is where all co-owners are equal.  There is a right to survivorship which means one of the co-owners passes away his or her share would then be passed on to the remaining co-owners.  This is common with married couples.  This does not go through probate when one owner dies.  And it does not pass according to a will.

Possible Issues

When the co-owners both die the descendant's ownership disappears.  It passes free of unsecured creditors.  There can be a problem if there are marriage difficulties or there are children for a previous marriage.  Also, it will not be included in the descendant's estate, therefore it cannot have an exemption made against it.

What Can a Farm Manager Do For You?

Landowners have benefited greatly from using farm management company.  Farm management companies can take away most of the stress and hassle involved in owning a farm.  What they do great is management of the farm and consultation with the land owner.

Farm Manager Can Help You Manage Your Lease Risk

Right now demand for land to rent is at a fever pitch in many areas.  Your farm manager can make sure you are getting what you should be getting in return.  He will make sure you are working with a farmer that respects you and your land.  Because, without that respect you could be taken advantage of and left with land that'll need to work to produce crops.  The farm manager will know the good and bad points about your farm.  He will help you negotiate from a position of strength.  Your farm manager will take care of everything for you so you can enjoy your farm asset as this is truly the golden age for agriculture.

Peace of Mind

Like most people, you are thinking about investing in farmland not only for your self but for your children or future children.  A farm manager can help you with that as well.  He make sure it's his fiduciary care for future generations.  He will make it a blessing and not a burden.

A Farm Gold Rush Is Coming!

Farmers Are Getting Older

Are farmers getting older?  Yes they are.  Why is that?  It's not what you think.  Farmers are getting older but it's not because they have to keep working.  They are sitting on a gold mine and they know it.  Farmers are getting older because they see the prices skyrocketing.  Analysis predict at some point prices will drop back to normal rates.  Instead of raising 20% each year, in the next couple of years we should see prices raise around 5% each year.

So, what does this have to do with farmers getting older?  They see the same thing we do.  Many farmers are waiting to see where this ends.  They want to cash out at the highest possible rate they can get.  And that is coming soon.  A farm gold rush may be upon us in the next few years.  

What will that do to the market?  It should become highly competitive.  Which could spell good news for buyers.  When there is a lot of inventory in the market, sellers will compete for buyers.  That day may be coming soon.

Sounds Like a Bubble

Now I understand that this sounds familiar to some of you.  The idea of more inventory than buyers sounds a lot like the housing market bubble burst.  However, remember most farmland is being bought cash.  For a bubble like the housing market to exist you need it to be driven by debt.  And for the farmland market to crash we would have to have a global event take place like the embargo against Russia in the early 80's.

So a farmland gold rush is coming!  This I have no doubt.  Be prepared.  Be informed.  We can help you with that.  Call us at 913-837-4665 or email us at info@ruralkc.com.  Talk with one of us and get on our email alerts to stay up to date.  Don't be left behind.  Because the farmland gold rush is coming.

Farmer Is The Key To Sucess

The Renter

Your farmer will have the same interests you do.  He wants you to find a good deal on land.  The less you pay for the land the less you have to charge him rent.  He has no interest in farming poor land.  He has no interest in farming frequently flooded land.  He only wants the best possible ground for you.  How can he help us do this?  He has local knowledge.  

Local Knowledge

He'll know all about the ground.  He may know of ground that is not on the market.  He may know of additional renters.  He can give us a look into the local market.  He may know of hidden traps or issues.  He knows of good land that is too isolated to farm.  And, best of all, he may know the motivations of the seller.

What Motivates the Renter

Things that motivate a farmer is what his rental rates will be?  Can the land be share cropped?  Will he have to buy more equipment?  How long will the lease be?  Things to to think about when drawing up a lease would be can the land be improved and will that lease allow the farmer enough time to make the improvements?  

What could need improving?  I may not have been in production for awhile so the farmer may have to clean it up and til it.  Are there fences to move?  Will it need to be terraced to improve water flow?  Is it a long distance from his operation?  How much can the land be improved over time?

How To Use The Farmer In Negotiations

Let's say you have identified a farmer you want to rent to before you have made an offer on a piece of land.  What he can do for you is give you local knowledge.  He can help you identify property that isn't on the market.  He may know the sellers motivations.  And he can keep the sale local and private if so wished.  Usually the rent agreement is already made before negotiating the sales price.  And the farmer would have already done all the due diligence before hand.

Now what if you put in an offer before you find a farmer?  You can make an offer contingent upon you finding a farmer.  This would motivate the seller and agent to help you find a good farmer.  If you don't find a farmer then the sale is null and void.  Let's say you find some farmers but all their rent bids are low.  You can renegotiate the price based on this.  Also, if you talk to farmers and they say the land is bad you can then cancel the sale and move on.

So Now You're Ready

So Now You're Ready to Look

How much land is available?  Well, if you're related to a farmer or a friend of a farmer then a lot of land is available.  I'm going to assume most of you aren't related or a friend of a farmer.  So, what does that mean for you?

Only 1% of the total amount of cropland is sold each year.  Most of that land never makes it to the market.  Why?  It's sold to family or friends of the farmer.  People living in or associated with the community the farm is located tend to get first crack at it.

This puts non-local investors at a major disadvantage in acquiring the best farmland.  Less than 1/2 of 1% of all US cropland is available for public purchase.  Which should lead you to the next question.  How do you sort this all out?  How do you access the best farmland which usually never makes it to the public market?

There are three parties to the sale.  There is the seller which can be a farmer, investor or estate.  The investor which tends to be someone from out of town looking to expand their portfolio.  And the renter who is also the farmer.  The renter is what we need to help us out.  The right renter will help you balance out all these issues.

What can that farmer do for you specifically?  Look for that in my next post. :)

How to Feed the World in 2050

So now we've establish that cropland prices are rising and will continue to rise.  The question you should be asking is why.  Why does it always rise and why did it suddenly spike recently?  The main reason it will always rise is no matter what happens in the world we will always need to eat.  It's a simple supply and demand aspect.  As populations continue to grow the need for food will increase.  With the increase in need of food the price in land that produces food will rise with it.  

The next question was what caused the spike recently.  That is simple.  China and Indian have become very modernized.  The average Chinese and Indians life has improved recently.  What is the number one thing people change when their financial life improves?  Food.  For example, think back to your college days.  What did you eat?  Whatever's cheapest right.  Now look at what you eat today.  You generally eat what you like and what tastes good.  That exact same thing is happening in China and India today.  No longer are they just eating basic things like rice.  Now they are eating beef and pork.

Now let's go back to the growing population.  The amount of people in the world has grown and will continue to grow.  However, the amount of land that can produce food will not grow and will stay the same.  As a matter of fact, only 14% of the worlds land is arable.

So the amount of arable land per person has dropped dramatically.  That's a scary and sobering picture.  The following chart displays the amount of available land per person from 1750 to 2050.  How are we to fix this problem?

China, which is the world's second biggest corn consumer after the United States, will use 47 times more corn now than it did 10 years ago.  That's an increase exceeding the entire corn crop of Brazil which is the worlds third largest producer.  According to Time Magazine, the average American consumes about 250 pounds of meat a year.  Meanwhile, the Chinese average roughly 100 pounds per year, while Indians eat only 10 pounds per year.

So how are we going to meet this demand?  We need to produce more food in the next 50 years than we did in the last 10,000 years.  By 2050 the worlds population will reach 9.1 billion people, 34 percent higher than today.  Nearly all of the population increases will take place in developing countries.  Income levels will be many multiples of what they are today.  In order to feed this larger, more urban and richer population, food production must increase by 70%.  Annual meat production must rise by 200 million tons to reach 470 million tons.

I hate to paint a stark picture but it is the truth.  The world is growing and the rate at which it is growing will only increase.  To meet the demand farm production must increase.  This creates the increase in prices of land.  Can it be done?  I think so.

How I Learned To Stop Trading And Love The Farm

How I Learned To Stop Trading And Love The Farm

I was thinking about discussing this video in depth.  It is a discussion by Stephen Diggle, founder of Vulpes Investment Management to the Global Aginvesting Conference in Singapore, China back in October 2012.  Then it crossed my mind to just show you the video.  This man is far smarter than I am and it makes for an easy post.  So sit down, enjoy and prepare to have your mind blown.

Farmland Vs. Other Asset Classes

You must be thinking, "Brad, this is all fine and dandy.  But why should I invest in farmland and not put my money in the stock market or other traditional areas."  I would say, good question.  You could do that.  You could do what everyone else is doing in investing.  You could go to the stock market and take a risk that it'll work.  You could go a safer route like large cap stocks, commercial real estate or bonds.  You could do that.  You would make money.  But what if I told you, long term, you're much more likely to see a greater return on cropland than you would on just about any other investing avenue.

Now you may say, "Brad.  I've heard you say the farmland always goes up in price.  How do you know that?  Nothing always goes up in price."  And I would say you are correct.  Cropland has dipped in price once.  But you need a bunch of things to go wrong at once.  And one of them has to be a global issue.  The only time we saw a drop in cropland real estate values was during the 80's.  Two things happened at the same time.  We went into a recession and we put a trade embargo against the Russians.  Why would an embargo against Russia drop prices?  They were our biggest grain exporter.  Once you take your biggest international customer of grains out of the picture, things drop drastically.

"Ok.  So land value almost rises.  But how do I achieve a good return on investment?  Isn't that the whole point of this blog?"  Yes it is.  And here's your answer.  Farmers are often romanticized in the media.  They are often portrayed as simple folk who work 24/7 and only worry about rain fall.  While some of that is true the simple folk thing is dead wrong.  Good farmers are some of the best business men out there.  They understand in today's world they can no longer go out and buy land to farm it on a daily basis.  They instead need to rely on investors renting the land to them.  So to make themselves appealing to investors they have to think like one.  They must make sure the rent on the land not only makes the farmer money but also gives the investor a reasonable return on their investment.  This is why cropland continues to be such a good investment option.  The next two charts will show you how investments in Illinois cropland stack up and the second one will show you how cash rent has risen over the years to make sure investors achieve that return.

Now to tie it all together nice and neat for you.  With the combination of the land value, investors need and cash rent availability, we come up with how you can achieve a return that makes you happy.  When these three things meld together we have a deal.  The final chart brings it all together for you and shows the average net returns in the Midwest over the past 60 years.

Wait! Just one more chart!  ...  Just kidding.

Mail Time!

From time to time I will answer some of the questions that you the readers will send my way.  I received a large inquiry recently and decided now is a good time to do it.

Carl in Omaha, Neb., asks: What type of opportunities exists when it comes to investing in cropland?

Brad: Many. There are different ways to improve return on investment (ROI). If it's just pure cropland you can share crop, cash rent or custom farm.  Different investors are comfortable with different options based on their knowledge of farming.  For example, a novice investor would probably start out with cash rent.  It's simple, the tenant farmer pays on lump sum and the investor knows what they're getting.  After awhile they may change it to share cropping which the investor would then be more involved in day to day operations.  They share the risk and income of the land.  Custom farming can be a varied option that I would only suggest to someone who knows exactly what they're doing and may even want to use a farm management company.  Other options could be to buy land with some timber and water on it to add hunting income off of it.  Or find land that has some conservation reserve program (CRP) as well.

Steve in Leawood, KS., asks: What's the process of identifying good investments?

Brad: I'll try answering that question without giving away all our secrets.  First we would identify what it is you're looking to do with the land.  Then we would scour our database and various websites to see what best fits.  The next step would be to have a local farmer that we trust give it his blessing and say he would like to farm.  The final step would be to match the price of the land with the estimated rental to achieve the highest ROI we can for you.  Now there's much more to it than that but that's the basic laymen terms to it.

Angela in Overland Park, KS., asks: How do you manage our risks?

Brad: This is simple.  We have many farmers that we work with in various areas of Kansas and Missouri that we trust.  They will tell us right off the bat whether the land we are thinking about is worth it or not.  Local farmers are the best way to find this out.  I can run my numbers and soil maps on land all day long and it my look great.  But a farmer is the most trusted way to finding good land.

Jenny in Des Moines, IA., asks: Isn't farmland heading for a bubble much like the housing market did?

Brad: No.  The reason I feel so comfortable about that is most cropland buyers aren't borrowing money to purchase the land.  They are cash buyers.  Often they are people who are fed up with the stock market and are looking to put their money into something that's more trust worthy.  Yes farmland has skyrocketed recently.  And eventually it will correct itself.  And what I mean by that is, instead of jumping up 20% in value it will drop back to increasing 3% to 5%.  Remember, land will almost always be worth more tomorrow than today.  It takes a global event to cause land values to drop.

Derek in Liberty, MO., asks: Are there any unique opportunities around the Kansas City area?

Brad: Yes.  I believe the sweet spot of cropland investing runs right along the Kansas Missouri border.  Is it the best pure cropland you can get?  No.  That's Iowa, Illinois and Indiana (the three I's).  However, if you are an investor, the best bang for your buck is the Kansas Missouri border.  Why?  The price isn't anywhere near the prices you'll see in the three I's.  So you can get more land for less and get a much higher ROI.

Danielle in Leeds, UK., asks: What's the best way to get started?

Brad: I had to answer an international question.  But it's a good one none the less Danielle.  The best way to get started is to contact us and set up an appointment.  Now with you we'll probably have to Skype or conference call but we will make it work.  This way we can find out what it is you're looking to achieve and try to find a deal that best suits your needs.  You can do that by calling us a 913-837-4665 or emailing us at info@ruralkc.com.

"Buy Land They Quit Making It!" ~ Mark Twain

A simple quote from one of my favorite authors.  A simple quote, yet one that speaks volumes.  On the surface it sounds funny and makes you laugh like many of his quotes and sayings.  However, once one thinks about it, it makes perfect sense.  

The question is, what makes something valuable?  Money is valuable.  But too much of it makes it worthless.  Gold is valuable.  But if things really go south it just becomes a paper weight.  Homes are valuable.  But eventually they suffer depreciation.  

Think about it like this.  As a young boy growing up just outside Detroit, MI, I love collecting baseball cards.  I even had a book that would tell me how much each card was worth.  I had varying degrees of cards worth varying degrees of money but never amounting to much.  One thing I did know, and anyone who collected baseball cards knows, the most valuable card was a Honus Wagner card.  

Why is his card so valuable?  After all, he was a good play but not great.  He was no Babe Ruth, Ty Cobb or Mickey Mantle.  What was it that made Honus Wagner's baseball card so valuable?  The scarcity of it. 

Which brings me back to Mark Twain's quote.  There is no new land being created.  Unless you're counting the south east coast of the Big Island of Hawaii.  But that land won't be useful in our life time and for many generations to come.  The fact that the land we have is the land we get is why prices for land will always go up.  Yes from time to time land will take a dip.  But it takes a major international event to make that happen.  I will go into more detail on that in a post later.  But to give you an idea of what I mean, land prices didn't go down during the Great Depression.  That's right.  It stayed the same but never dropped.

So when I hear someone say, "Land is going for more now than it ever did before!"  I'll say, yeah that's true.  And that saying will be true tomorrow because land will be going for more tomorrow than it did today.

To give you a good and final idea of what I'm getting at I'll leave you with a quote from Cropland Investment LLC.  "Like buying gold if it paid a dividend."

Who is This Guy?

Who should I use to help me find the perfect farm for me?  What return on investment can I expect?  Where are the best deals to find?  When is a good time to buy farm land?  Why should I buy farm land and not invest in the stock market?  How can I find a trust worthy farmer?

These are common questions we at Rural Kansas City get from new investors.  With this blog I hope to answer these questions and answer much more.  My name is Brad Gaughan senior partner of Rural Kansas City.  First off I know the most important question going on in your mind is, How the heck do you pronounce that boys last name?  Just to avoid future confusion my last name is pronounced like gone.  Think of it like the more common last name Vaughan.  Just substitute the G for the V and away you go.

 

Now that we have that out of the way, the next question would be, why should I listen to this guy.  For one I have lived all over the Midwest.  From Iowa, Nebraska, Michigan, Kansas to Missouri.  I have worked in the agriculture business for the last five years helping investors find farm land that will make a good return.  And, I’m just one heck of a guy.

The gist of this blog is to inform you of what’s going in today’s farming industry and investing.  I will cover what I think is important and you need to know.  I will do my best to explain things in the farming industry in laymen’s term.  Because, believe it or not, farming information and factors can sometimes sound like a different language.  And I invite you to email me any questions you might have.  And don’t be afraid to ask a silly question.  Odds are someone else sitting in same boat as you has the same questions.  My job here is to inform the uniformed and I truly believe there is no substitute for information.

 

So fire away with any questions and comments and lets have fun exploring different aspects of the farming industry.  And hopefully you come away with a better understanding and become a more informed investor of farming.