There is little doubt that the year 2020 presented challenges to the world not seen in recent memory. The COVID-19 pandemic reminded the human population that there exist many factors beyond the control of our most foresighted experts and that our collective desire for unfettered progress is an unrealistic aim. How might this "new normal" impact the value of agricultural land investment?
The flight from urban areas
The onset of COVID-19 operated as a trigger for many financially capable individuals and families to exit the large urban areas of the U.S. Particularly hard hit have been New York (and the greater Northeast), Los Angeles and the several large cities of Florida. Forced lockdowns, high rates of taxation on income, struggling school systems and sometimes violent protest and civil unrest are all factors contributing to this substantive exodus from the highly populated areas to locales viewed as more stable in these particular times.
How does this affect farmland values?
According to the USDA's recently released 2020 land values report, the average value of an acre of agricultural cropland is $4,100, a price remaining steady in terms of 2019 valuations. This may come somewhat as a surprise given the immense pressure of virus responses, including impacts on the entire grower-to-consumer supply chain. There were certainly concerns on the farm revenue side of the equation at the outset of COVID-19. It is likely that we have yet to witness all impacts on the economy that bear the mark of COVID-19, but it seems a welcome indicator that land values remained steady thus far throughout the pandemic.
When trying to gauge future trends in farmland investment, perhaps it should be encouraging that many prospective investors are leaving their urban environments in favor of rural settings that are, on the whole, more affordable and require less capital investment going forward. Every dollar that was spent on big city taxation, public transportation, exorbitant retail prices and expensive real property can now be redirected for investment. It follows that some portion of the realized savings can, and will, be redirected into investment in farmland. It also means that rural residential home and land values are increasing due to this increase in demand.
Why farm investment makes sense
Whether you count yourself among those who have recently made the move away from city centers, you are a current or wanna-be farmer looking for an area to hone your craft, or you are simply interested in ways to diversify your portfolio, agro-investment appears a quality choice. This pandemic provided those in America and around the world a clear and convincing look at the processes and industries that are of the utmost importance in keeping society high-functioning. Agriculture and commodities are presently viewed with the utmost respect by all key decision-makers and policy dictators. Finally farmland historically is an excellent hedge against inflation, which may eventually result from all the government stimulus pumped into the economy. This combination of available investment dollars and a re-energized sector for cash infusion appears likely to equal substantive gains in the arena of agricultural land value.
Halderman Real Estate & Farm Management can assist you in realizing the opportunity for investment in agricultural land. Our full-service commitment to your acquisition or sale of farmland allows you the freedom to concentrate on the big picture of your investment strategy while we manage the details. Contact us today so that we can put our reliable resources to work for you.
