In farm management, volumes will be written about 2020, which appears destined to be “one of those years.” As we have faced uncertainty due to COVID-19, many people have been finding their new normal. Personally and in agriculture, the assessment is similar: Everything has changed, but nothing has changed. Here’s a look:
As an asset class, farmland doesn’t correlate to other investment opportunities, such as the stock market. As we close out the year, the farmland market is strong and in good demand. Why? Farmland continues to come to the market for the same reasons as in the past — primarily estate settlement — and is being purchased by the same buyers — primarily farmers.
Will this continue? Most believe so, as farmland continues to be a great part of a diverse portfolio, offering stable returns that have been bolstered by government support and further supported by continued low interest rates. This flat response has been in place for the last few years across most land classes, and while stability is not sexy, this static response to these volatile times is most welcome.
Farmland rental rates
Stable is again the word, but rental rates have ridden the roller coaster to get us where we are today. When grain prices softened in the spring and tested their lows during the summer, many were taking a defensive posture for finishing out 2020 and negotiating 2021 — right up to the beginning of harvest.
Then, as an abundance of positive news came about, changes started to occur like a domino effect: adequate growing conditions (with apologies to our Iowa derecho friends) led to good to average yields, Coronavirus Food Assistance Program 2 payments, 2019 Agriculture Risk Coverage and Price Loss Coverage payments, and then a most welcomed harvesttime commodity price rally.
Certainly, all is not glittery, as much uncertainty remains for the future, but the bias for this topic went from negative to neutral in the month of October alone. No major trends or changes are expected in lease types at this time, but topics for discussion between managers and operators may include consideration of ad-hoc government payments as a part of the rent and how safety nets for both parties can be put in place in these volatile times.
We continue to see evolution in crop protection, particularly on the soybean side; but again, 2020 has given us an interesting ride in soybean weed control alone. First, we had dicamba; then we didn’t; then it was back with restrictions; and now it’s back with 2018 rules. Are you keeping score?
This winter, farm managers will take a hard look at weed control strategies that include old-school non-GMO, dicamba products with old and new labels, and 2,4-D products that, for the most part, debuted in 2020. In many cases, the data that drives those decisions in this on-again, off-again world has made this contemplation difficult at both the company and farmer levels.
The look forward into 2021 provides us with a much more positive outlook than the whirlwind of 2020 uncertainty. The hope is that stronger commodity prices, rising exports and steady land values will become stable cornerstones moving forward. Like the Illinois weather, this can change very quickly. Stay tuned.
Carmien is a farm manager with Busey Ag Services, Champaign, Ill., and a member of the Illinois Society of Professional Farm Managers and Rural Appraisers. Email questions to email@example.com. The opinions of this writer are not necessarily those of Farm Progress/Informa.