Episode-1006- Aaron Batteen on the Economics of Farmland — 19 Comments

  1. Great topic, Jack, and thank you very much, Aaron, for your work. You and I should talk. I’m a civil and ag engineer, currently working at a state agency (yuck, I know) and pursuing a PhD in ag engineering. I’d like to do research that shows (i.e., quantifies) how free markets in agriculture would improve the environment. I’m looking for economists to work with to brainstorm ideas on how my skills (understanding and predicting the processes involved) can be used by folks like yourself to put some numbers to your ideas. Difficult, I know. Looking foward to listening, and I hope you’ll participate in making comments here, and if interested, contact me. If you’re already on the TSP forum, we get the ball rolling by PM there.


  2. One thing that I didn’t hear mentioned which could impact the earning potential of farm property is proximity to its served market. If you had two identical properties with one 20 miles from its primary market and the other 200 miles away from its market, the closer farm is going to have a higher earning potential.
    Think of it this way. If you buy a small farm in a small community with a hundred other small farms you are going to have a hard time selling your goods. If the farm is just outside a larger city it will be easier to sell your goods and your transportation costs will be much reduced.

    • The US market for agricultural goods is considered a nearly perfect competition model. Growers get one price for their goods – whatever the prevailing price is across the nation at the time. Most of the produce is sold to warehouse owners who arrange transport by truck or rail to larger hubs or to food processors. The cost of transport is largely paid by them. In many instances, regions local to farmers have warehouses that hold the goods off the market until prices rise. So in the US, at least, proximity does not have a large effect on profitability from a production standpoint.

      On the other hand, proximity to urban centers can affect the land value greatly because of urban sprawl and other minor market forces that accompany living near more populated areas.

    • That’s true if you’re comparing truck farms that sell directly to consumers, rather than into the regular supply chain.

      But our modern supply chains are so efficient that the cost of energy embedded in the price of an apple you buy at the supermarket will usually be less than the apple you buy at the farmer’s market. (Of course, I’m not in any way saying that makes it a better apple!)

  3. It’s probably because I recently bought a house and a few acres, but I get so jazzed about all the possibilities. If I could, I would buy more land. I would absolutely buy 100 acres and sit happily in the middle of it. That is pure heaven to me. But, I’m happy to have what I have and I want to take full advantage of it. The feeling that I get form hard work I put into my land is sooo different than the feeling I get from a good day at my work. It’s just a little bit closer to my boyhood dreams of being a free mountain man. And I’ll take it.

    As always, you do a great job Jack.

  4. Just fyi – my dad farms 3000 acres in north central Iowa, where farmland goes for about $10,000 – $15,000/acre right now, and he has never irrigated, ever. Just had to correct that, because my dad actually had some of his best corn yields ever this year, despite the drought, due to the great northern Iowa soil & water table! Had to chime in, since this is my area of expertise! 🙂

    But good luck trying to buy land up there right now – another big reason land is going up is due to baby boomers retiring, selling their businesses, and rolling the funds over into farmland to avoid taxes (and to live of the rent income in retirement.) Some of our extended family just sold a bunch of land, and the guy who bought it was from Florida & had just sold a chain of Dairy Queens. He hasn’t ever even been there to see the land – he just rented it back to our family (and jacked up the rent, of course.) Kind of sad. The many joys of farming… and one of the reasons why it’s easier said than done to get farmers to change how they farm – most “big” farmers these days are farming land that’s split up in ownership among many, many parties, extended family or otherwise.

  5. My husband & I just finished watching the Polyface Farm DVD by Joel Satilin. He has some very interesting ideas on how to make your farm more profitable.

  6. Haven’t listened yet, but will shortly. Wondering if we address how the price of farmland may change if interest rates skyrocket.

    I own 60 acres in Indiana and not much of that is tillable, though it’s nice for a homestead. I’ve always really wanted to buy my dad’s 250 acres in Illinois, but now I’m nervous that values will really drop when interest rates rise. Of course, I’m also nervous that Illinois property taxes will skyrocket because the state is such a fiscal disaster.

  7. You can’t make more land, but you can build soils. As your investment in the soils grows so will it’s production.

    • @Paul

      Precisely and this is where the opportunity is, specifically for Permaculturists. All the people so obsessed with main stream farming changing (and I am not saying it doesn’t need to) who are obsessed with the Permaculture model should read Permaculture One by Mollison and Holmgren. The introduction acknowledges the need for some broad acre crops and states that permaculture is ideally designed and suited for marginal lands that are not currently engaged in agricultural pursuits.

      That doesn’t mean you shouldn’t do permaculture on really great Iowa farmland, it would be awesome but as another commenter just stated such land is 10-15K an acre right now. Lots of land is 4-7 and can crush it with permaculture and a few years invested.

  8. I am likely to inherit 40 acres of farmland just south of the Fresno, CA area. (I grew up on this farm.) Because my job/home is some 4.5 hours from the farm, I am planning on leasing it out to a local farmer or a local dairyman to use.

    Problem is, I do not want the home on the property disturbed.

    I have no idea how much I should be leasing the land for, nor how to ennsure the home is left undisturbed by the person I am leasing it to.

    Who should I talk to in the area to find out about lease rates, contract details, etc? Should I speak with a real estate attorney about lease rates, etc? I have no idea where to begin. Could somebody please pitch in and help me out here?

  9. Hey Guys,

    Very interesting show. One of the things that struck my attention was the talk about China, their increasing caloric consumption, their in ability to expand their farm land usage and how that MIGHT translates to increase sells for American Farmers. One of the things that Aaron did not expound on was the fact that China’s government has been buying lots of farm land in various countries world wide, which of course includes the USA. They are taking the surplus dollars that they have made off of investing in our bonds and buying up our land and other natural resources. Something to think about as there is a lot of action going on behind doors. Anyway a very informative program. Thanks a lot.

  10. I’ve heard from a grower in CA (I grow mixed veg. in Western PA) that at current fuel prices it costs ~$10,000 to move a tractor trailer load of bell peppers from CA to the eastern seaboard. IMO you’re from crazy town if you think local small to mid scale growers within 50-100 miles of their market won’t be able to crush them on price. One of two things will happen, big name grocery chains will either have to begin to source from growers closer to their POS or those big name chains will begin to lose market share to co-ops and farmers markets. Either way, big ripples are about to be sent through our national food distro system. Add in an upset against Monsanto on Prop 37 tomorrow and you can change ‘ripples’ to ‘waves’. 🙂