Conan the Farmer - 3/11/2019 22:31

I explained why. A sub-inflation ROA is a poor investment.

Why do you think because they pay in cash or were experts in some other field, it makes their investments in agriculture wise and effective?

I wonder if your man in Washington is in business with the ones I know from the same state. A former Microsoft executive of some sort heads the group. Here’s a farm they bought in a table I’m working on. The highlighted box is dollars per CSR point. CSR is an index number for corn productive capability in Iowa. It’s not a be all end all, but I use it as a starting point to sort farms by similar values. Anyway, I had to highlight it and point out that they are paying 136% over market. As someone who has seen all 6 listed there, knows the area, and knows the sales scores of other farms in neighboring counties and over the past few years; those people pay far more than others do for similar quality property. This in a downtrending macro environment nonetheless. $89.29 a point vs $65.48 for an average....

These are cow pastures and mixed hill farms for anyone wondering. Lot of northern Iowa types wish they could get land for $90 a CSR point... and that’s part of the problem, these investors and their agents have no local competency. That top farm is just an example because I am working on that right now. The family who sold that to them is one of the largest operators in that county. They took those investors to the cleaners. When their little 3 year rent back lease is up, they’ll have a sub 2% cap rate on a parcel that will recover its value in 19 years nominally at current growth rates and, inflation adjusted... well who knows when....

Maybe they know something we don’t or maybe you do Lawn. Is there a great new source of demand coming? Something that will blow us up to a new level? Can we at least expect the return of $5 and $12 for the long-term?

Without it their investment in that farm and most of the others I allude to, even being purchased at this moment, are doomed to a generation or more without recovering their real value. They won’t go broke because they pay in cash. But their real returns are pitiful.