Is farmland still a good investment?
“Absolutely,” said David Kohl, professor emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Kohl spoke at the International Ag Expo in Grand Forks, N.D., earlier this year.
While land is “absolutely” a good investment for farmers, it may seem hard to justify paying the going price for land, Kohl says.
“It is like having a baby,” he says. “You don’t think you can afford to have a baby, yet it turns out to be the best thing you ever did.”
The value of farmland has appreciated or stayed level 70% of the years from 1920 to 2017, Kohl says. Since World War II, land has appreciated or stayed level 88% of the years.
Making it work
In his wide-ranging farm management outlook at the International Ag Expo, Kohl also offered this advice:
• Cash is still king. Having ready access to cash not only buffers low-income years, but also gives you the opportunity to take advantage of opportunities that come up to make the business more efficient.
• Change is accelerating. You’ll likely see more change in agriculture in the next 10 years than the last 70 years. The change may not be in technology, though. Consumers are rapidly forcing changes in how food is produced. Consumers and nonprofit advocacy groups have become bigger disruptors of agriculture than government regulators.
• Don’t bet the farm on future trade with China. China may not be a big importer of U.S. commodities in the future, even if trade deals that have been announced are adopted. China is working toward making Asia self-sufficient in food, fiber and fuel.
• Think about three new skills. These skills will be necessary for today’s youth to become successful farmers and ranchers in the future. They will need to understand data and where to obtain it. They will need to know how to think critically about the data and not “check their brains” at the door. They will need excellent written, oral, nonverbal and face-to-face communication skills. These three things differentiate those who are successful from those who are not.
AgCountry Farm Credit Services sponsored Kohl’s appearance at the International Ag Expo.