Iowa farmland vs. S&P, 1950-2011

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papito23
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Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Wed Apr 04, 2012 6:04 pm

Context:
My father inherited land that his father farmed for most of his life, straddling Cerro Gordo & Hancock Counties in north central Iowa. My father, like most who grew up on the farm, has stressed to me the importance of holding on to this land. I wanted to test the conventional wisdom that land is less volatile and steadier than the stock market. "They ain't making no more of it," as they say. "People will always need to eat."

I ran numbers from 1950-2011, using average Iowa farmland prices. Compared that with the S&P 500.

Results: (full excel sheet here)
S&P / Farm...
Capital Return: 7.0% / 5.8%
Income Return: 3.7% / 3.4% (2011 farm rent rate, as it fluctuates inversely/significantly with land valuation; historically 5-6%, now lowest since 1978 at the least)
Total Return: 10.7% / 9.2% (not actual - using current rents of 3.4%)
Standard Deviation: 17.8% / 10.6%
Sharpe Ratio: 0.46 / 0.63
Longest capital "drought": 13 years / 22 years (time with no appreciation, inflation ignored)
[Edit:
Steepest drops (using year-end returns only, not peak-trough)
S&P: 2000-02 (-38%), 2008 (-37%), 1973-74 (-35%)
Farm: 1979-1986 (-72%), 1967-1971 (-10%) ]


Hypothetical $10K investment, income excluded (note - not one "acre of land" but $10K worth of "acreage"; in 1950, that was 46 acres of good topsoil):
Image
FYI The difference in returns is erased if one starts in 1960 instead of 1950.

Conclusions:
*The Sharpe ratio suggests Iowa farmland has done better than the S&P given the same amount of risk.
*However, farmland had one quite long period with no asset appreciation (22 years, vs. 13 years for S&P); namely, the massive land devaluation of the early '80s. This is compensated to some degree by the fact that income from farms (rents) are usually higher than income from stock (dividends); farms averaged 6.6% in income during these 22 years. From 1978-2011, these were 5.8% (farm) vs. 2.9% (S&P), respectively. However, income for each asset class is not consistent either.

Sources:
S&P returns 1997-2011
https://personal.vanguard.com/us/funds/ ... t=tab%3A1a
S&P returns 1960-1996
http://techfarm.blogspot.com/2008/04/hi ... yield.html
S&P returns 1950-1959, S&P Total Return 1950-2011, & Standard Deviation:
http://www.moneychimp.com/features/market_cagr.htm
Cerro Gordo Co. rent rates, 1978-1993:
http://www.extension.iastate.edu/agdm/w ... /c2-11.pdf
Iowa farm rents, 1994-2011:
http://www.extension.iastate.edu/agdm/w ... c2-09.html
All other farm values:
http://www.iowaworkforce.org/trends/farmhist.html
S&P Prices, 1950-1959
http://finance.yahoo.com/
S&P Prices and Yields, 1960-2011:
http://w4.stern.nyu.edu/~adamodar/New_H ... spearn.htm
Last edited by papito23 on Fri Apr 06, 2012 9:13 am, edited 2 times in total.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by deerhunter » Wed Apr 04, 2012 6:28 pm

I will take the land any day. I can live off the land.
Living off the land is a family tradition.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Wed Apr 04, 2012 6:40 pm

deerhunter wrote:I will take the land any day. I can live off the land.
Judging by your name, it appears so. I've got a lot more target practice to do! Thanks for putting it so well. I haven't, however, found how to harvest healthcare off the land. Well, I suppose my grandparents figured it out... they leased the land in exchange for a few numbers in an Iowa bank's server :)
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Re: Iowa farmland vs. S&P, 1950-2011

Post by Lbill » Wed Apr 04, 2012 7:09 pm

That's a most interesting and well-done analysis. I wonder if there is anything else like it available. Helps to put some actual data on the "buy farmland" chant that one continually hears to see just how it would actually work out.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by bottlecap » Wed Apr 04, 2012 7:17 pm

Does this include real estate taxes?

Iowa farmland is certainly in what, at this point, many people would be calling a bubble at this point. I have some in-laws in Iowa and they are sitting pretty (although they'll probably never sell).

JT

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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Wed Apr 04, 2012 9:02 pm

bottlecap wrote:Does this include real estate taxes?

Iowa farmland is certainly in what, at this point, many people would be calling a bubble at this point. I have some in-laws in Iowa and they are sitting pretty (although they'll probably never sell).

JT
No taxes considered, and that's a big hole in this picture. You have property taxes on the capital end, then the high-income advantage of land rents might mean a tax-drag on the income tax side, depending on what's deductible (according to my father, not much).

This also ignores other costs of investing - finding a rentor and maintaining that relationship, paying liability insurance, etc. There are those pesky 0.17% ER costs to index funds, but stocks win in terms of simplicity, ability to buy in small increments... then again you can't dig your hands in an S&P 500 index, nor could you plant a garden on it, build a house.

Many things lacking in this picture, but I hoped it would start to reveal something.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by ClevrChico » Wed Apr 04, 2012 9:08 pm

Very interesting. Now and then I hear city slickers wanting to "invest" in farmland. I'm not sure what to think of it.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by FrugalInvestor » Wed Apr 04, 2012 9:09 pm

Lbill wrote:That's a most interesting and well-done analysis. I wonder if there is anything else like it available. Helps to put some actual data on the "buy farmland" chant that one continually hears to see just how it would actually work out.
Not "how it actually would work out" but how it may actually have worked out. There's potentially a big difference.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

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Re: Iowa farmland vs. S&P, 1950-2011

Post by 3CT_Paddler » Wed Apr 04, 2012 9:21 pm

Without the last four or five years, farmland doesn't look like the same investment. You basically had a two decade period where it was very difficult to make a decent living on it. I have some family who still own/run farms in Iowa, but most of them who grew up on the farm have transitioned to different jobs across the country.

And even when everything is going well, like right now, it makes it very expensive to start out or add to your current acreage. Which sows the seeds ( :oops: ), for the next bust.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by CABob » Wed Apr 04, 2012 9:36 pm

I am reminded of the group of Texans talking and bragging about the size of their ranches. One had 1000 acres, another had 3000 and still another had 5000 acres. One Texan was quiet during the conversation and the others turned to him to ask how many acres he owned. He replied, "Oh, about 80 acres." The others smiled with amusement and asked what he called his ranch and the reply was, "Downtown Dallas."
Which brings me to ponder what would the numbers look like if they included land that was eventially developed into residental or commercial use.
Bob

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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Wed Apr 04, 2012 9:43 pm

ClevrChico wrote:Very interesting. Now and then I hear city slickers wanting to "invest" in farmland. I'm not sure what to think of it.
I came across this way to invest in farmland: Agrinuity. (No association with me, just found via Google). You will notice the cherry-picked graph on the link provided (1991-2008 return of farmland vs. S&P).

FYI: The age of the average farmer is 57. That's insane. :shock:
http://www.npr.org/2011/02/27/134103432 ... pping-Away
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Re: Iowa farmland vs. S&P, 1950-2011

Post by DWSwildcat » Wed Apr 04, 2012 9:45 pm

Athada,
Check out my analysis on the Permanent Portfolio website. I did much the same analysis using Nebraska Farmland dat.

http://gyroscopicinvesting.com/forum/in ... pic=2316.0

One thing that's important to realize is that farmland is a great counterbalance to stocks. From your chart (and my analysis) farmland performed great at exactly the same times the stock market tanked (1970's and 2000's). Farmland and stocks have a zero correlation to each other and farmland also has a 94% correlation to inflation.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by ClevrChico » Wed Apr 04, 2012 9:54 pm

Of course, if you own an Index fund, you own ag companies which make their money from the land...

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Re: Iowa farmland vs. S&P, 1950-2011

Post by hazlitt777 » Wed Apr 04, 2012 9:56 pm

Here is a discussion about farmland as an investment we had not too long ago: http://www.bogleheads.org/forum/viewtop ... =1&t=88087

It seemed that in general the percentage return on the investment is rather low right now...which means either the land is overvalued, or the rent being charged is too low.

If I could find a few acres, I might still buy it just to say I have a few acres...but I couldn't justify it as an investment right now in Wisconsin anyway.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by ilmartello » Wed Apr 04, 2012 11:19 pm

CABob wrote:I am reminded of the group of Texans talking and bragging about the size of their ranches. One had 1000 acres, another had 3000 and still another had 5000 acres. One Texan was quiet during the conversation and the others turned to him to ask how many acres he owned. He replied, "Oh, about 80 acres." The others smiled with amusement and asked what he called his ranch and the reply was, "Downtown Dallas."
Which brings me to ponder what would the numbers look like if they included land that was eventially developed into residental or commercial use.

That was worth a good chuckle.

Imo, the price of farmland should be closely correlated to the value of the commodities that can be farmed off that land. I think, that especially in Iowa, farmland is going to have a bad future. Iowa and other Midwestern farm states have benefited handsomely from biofuel subsidies and tax credits, i.e. the blender credit. It was earlier thought that lobby was too powerful and those subsidies would be with us forever, but they expired in 2011 without a whimper. Policy analysts have taken a dim view of biofuels since their heyday in the mid 2000's. Similarly general farm subsidies look like they are next on the axing block. I wouldn't bet the farm on the value of Iowa's farmland, so to speak.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by adam1712 » Wed Apr 04, 2012 11:34 pm

Thanks for the analysis. I have a very similar situation where most of my parents retirement savings is farmland in Iowa. My father has done quite well for himself. I wish he would diversify a little more but there's no convincing him now. He does have a little in an IRA but he says the farmland has done considerably better. Two things really helped him though. His timing in acquiring most of his land in the 80s (except for grandparents' farmland) was nearly perfect. Also, he was always buying with farm loans and thus always using leverage. I'm hoping in the future we'll keep some of it in the family since I think it can be a good investment especially if you don't mind the extra work of managing things and have a good tenant. But I also don't want it to be my primary investment.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Tuxx » Thu Apr 05, 2012 1:36 am

Not factored in:

The tax breaks farmers get.
The value of the produce that was grown.

The farmland is constant the S&P holdings change every quarter so it is not apples on apples.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Valuethinker » Thu Apr 05, 2012 3:14 am

deerhunter wrote:I will take the land any day. I can live off the land.
Not if it does not rain. Think the 1930s Dustbowl (there were bad farming practics, but also no rain).

Most places in the world you can go and find land that was once fertile, and is no longer either to shift in climate (less rain) or soil depletion and loss, or both.

Libya and Syria were, once, the breadbaskets of the Roman Empire. There were riots in Rome if the grain fleets from there did not arrive on time. Now they are dry and quite infertile, they import much of their food supply.

And the soil blows away. Soil degradation is a big problem in almost any part of the world that has had agriculture. The 'Fertile Crescent' of Iraq, was the first place we had agriculture, and much of it now is wasteland.

Iowa you could build wind turbines which would provide a regular income of some form -- assuming the wind keeps blowing (a fairly safe bet, but there are big annual variations, most places). And that there is a demand for that electricity.

Then there is groundwater, which is fast depleting in most places in the USA West of the Mississippi (and in Libya, they are pumping centuries old water out from under the Sahara).

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Valuethinker » Thu Apr 05, 2012 3:18 am

athada wrote:
deerhunter wrote:I will take the land any day. I can live off the land.
Judging by your name, it appears so. I've got a lot more target practice to do! Thanks for putting it so well. I haven't, however, found how to harvest healthcare off the land. Well, I suppose my grandparents figured it out... they leased the land in exchange for a few numbers in an Iowa bank's server :)
Nor does land produce hydrocarbons (biofuels are generally a con, in my view, the yield is so low-- biodiesel from waste fat an exception).

You can't farm without gasoline/ diesel, fertilizer, pesticides. Even organic you still need to fuel your van and tractor-- unless you go Amish.

Fertilizer takes potash (Saskatchewan is half of world supply) or phosphate (Morocco is over 60%).

One of the big issues here is rural areas can't get good broadband. The local economies depend on people being able to move out to the countryside but do work, shopping etc. on the internet. They are tightly bound into the urban economies.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by DaleMaley » Thu Apr 05, 2012 6:08 am

Our small local weekly newspaper in Central Illinois runs a section every week on what happened in the past. They report on past news every 10 years going back 120 years ago.

I don't have the data handy at the moment, but a couple times I plugged in the price of farm land sold 100 to 120 years ago against today's prices........and the CAGR is about the rate of inflation over the same time period.

Central Illinois farm land has seen its share of bubbles. I remember when land peaked at $6,000 an acre in the early 80s, then crashed to about $2,000 an acre. Now it is back to $12,000 an acre for prime ground. We may be back in bubble territory again.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by Joe S. » Thu Apr 05, 2012 8:18 am

This is an interesting article from 1977. From this article it would seem that farmland prices did much worse from 1910-1950 than they did later. However the article discusses general farmland prices not Iowa prices.

http://www.chicagofed.org/digital_asset ... njamin.pdf

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Valuethinker » Thu Apr 05, 2012 11:13 am

Joe S. wrote:This is an interesting article from 1977. From this article it would seem that farmland prices did much worse from 1910-1950 than they did later. However the article discusses general farmland prices not Iowa prices.

http://www.chicagofed.org/digital_asset ... njamin.pdf
From memory, the world price of wheat reached its all time peak in 1910. Probably US and Canadian midwest farmland peaked at the same time.

We can say that food price cycles are very long term. The general trend has been down due to better technology (bigger farms, more machinery, more fertilizer, more pesticides). Conversely demand has been rising with increasing wealth, increasing consumption of meat, population growth etc.

So far supply side has stayed ahead of demand side, but in world history there have always been cycles, it would be unwise to assume we have abolished food scarcity.

Probably land prices also cycle.

I think the long run estimate for UK agricultural land over the last 200 or so years is +1% of inflation. Note for a long time (still?) the UK was the world's largest food importer.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by IMADreamer » Thu Apr 05, 2012 8:50 pm

papito23 wrote:
ClevrChico wrote:Very interesting. Now and then I hear city slickers wanting to "invest" in farmland. I'm not sure what to think of it.
I came across this way to invest in farmland: Agrinuity. (No association with me, just found via Google). You will notice the cherry-picked graph on the link provided (1991-2008 return of farmland vs. S&P).

FYI: The age of the average farmer is 57. That's insane. :shock:
http://www.npr.org/2011/02/27/134103432 ... pping-Away
No surprise there. My family farms and my Dad is 58 and my Uncle 57. We have a hired hand who is 63. Then of course there is me who doesn't farm as a career but still works on the farm who is 31. All the farmers in our area are older because it's damn near impossible to just start farming if you are young and the cost of land is making it hard to expand existing farms so that the next generation can live off it too.

Anyway I hope you guys all see this study and stop buying land. That way the bubble bursts and I can pick up another 1500-2000 acres and I'll just farm the rest of my life and leave my "career" to someone who likes working in an office.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Charleville » Thu Apr 05, 2012 10:12 pm

Farmland is great right now--all that liquidity has to go somewhere if people aren't buying stocks (many investors still down on stocks despite the run). But google "farm crisis" and 1920s or 1980s it was brutal to live in Iowa during those times.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Grt2bOutdoors » Fri Apr 06, 2012 8:35 am

I remember reading about the 80's farm crisis, people losing their farms, thought farming was a sure thing and levered up to buy equipment and more land. This reminds me of Bernstein's book that says to look at history to see where we are going. Some people never learn, trees do not grow to the sky forever. This too shall pass, but we will likely be reading about this at some point.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Fri Apr 06, 2012 9:13 am

I forgot to insert the following, which I added to the original post. It shows the 7-year, 72% decline in farm values :shock:

Steepest drops (using year-end returns only, not peak-trough)
S&P: 2000-02 (-38%), 2008 (-37%), 1973-74 (-35%)
Farm: 1979-1986 (-72%), 1967-1971 (-10%) ]
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Re: Iowa farmland vs. S&P, 1950-2011

Post by Rubiosa » Sun Jan 06, 2013 12:18 pm

"My father . . . stressed to me the importance of holding on to this land."

I hope you took his advice.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Sun Jan 06, 2013 5:27 pm

Rubiosa wrote:"My father . . . stressed to me the importance of holding on to this land."

I hope you took his advice.
He's the one who inherited it. We walked the CRP field over Christmas (500 mi from where either of us live) and I collected a soil sample to put in a Ball jar for my desk as a memento. As the family connection to the land has been largely severed by distance, we had discussed the idea of selling the land and buying immediately in the state where we now reside.

Soil is the hardest of hard assets.
Image
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Re: Iowa farmland vs. S&P, 1950-2011

Post by Rubiosa » Sun Jan 06, 2013 7:29 pm

papito - My farm is 800 miles from my home, but it makes no difference in my keeping a tight rein on the goings-on there, via texting, emailing and regular visits with my farm operator. Your statistical analysis is rigorous, but I believe a good stat man (which I'm not) could do just a rigorous a study and conclude it best to keep your farm. As a near-80-year-old farmer myself, I believe I'd go with your Dad's thinking, and all this high-falutin stuff they'e teaching up at the colleges, be damned. :^)

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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Sun Jan 06, 2013 7:51 pm

Rubiosa wrote:papito - My farm is 800 miles from my home, but it makes no difference in my keeping a tight rein on the goings-on there, via texting, emailing and regular visits with my farm operator. Your statistical analysis is rigorous, but I believe a good stat man (which I'm not) could do just a rigorous a study and conclude it best to keep your farm. As a near-80-year-old farmer myself, I believe I'd go with your Dad's thinking, and all this high-falutin stuff they'e teaching up at the colleges, be damned. :^)
My analysis was quite limited and certainly it is impossible to predict the future of agriculture. Perhaps this is dangerous for an investor, but one has to be almost philosophical about it perhaps. (Though I know emotions can lead to bad decisions). Land has something of a fundamental, almost primal value, even though another 25-year bubble may be about to burst. It is the definition of a long-term investment.

In bringing up several concerns about certain things (unknown tracks on the CRP land, a strange crop-circle-ish thing on Google Maps satellite imagery), my father was strangely uninterested. He is more into trading stocks. Out of sight out of mind? At least he knows he has a good renter and a good rate ($250/acre with a strangely ambiguous handshake agreement on +$50 for a "good year").
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Re: Iowa farmland vs. S&P, 1950-2011

Post by roymeo » Sun Jan 06, 2013 7:57 pm

ClevrChico wrote:Very interesting. Now and then I hear city slickers wanting to "invest" in farmland. I'm not sure what to think of it.
I remember the men at the feed store chuckling about the guy from the city that thought he was retiring when he bought a working farm.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by hazlitt777 » Sun Jan 06, 2013 8:19 pm

I was seriously considering buying 20-40 acres of Wisconsin farm land as a diversification. But when you do the math, with farm land going for 6,000/acre and with the rent you can get being around $150/acre, that is only a 2.5% return. And that is before taxes on the purchase and taxes on the rent.

I do believe in our state, once before land went way up and then the bubble "popped." Is it a bubble again? I don't know. Also, it can be a rather illiquid investment. If I were a wealthier man, perhaps I could justify it just to have a nice piece of land to walk on.

I don't feel I understand land well enough to make th leap...so I listened to my father and stayed away from it.

And I think all farm land is "location, location, location" just as they say about rental properties. So you would have to know your particular area well. Just my thoughts on it.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by papito23 » Sun Jan 06, 2013 9:51 pm

hazlitt777 wrote:I was seriously considering buying 20-40 acres of Wisconsin farm land as a diversification. But when you do the math, with farm land going for 6,000/acre and with the rent you can get being around $150/acre, that is only a 2.5% return. And that is before taxes on the purchase and taxes on the rent.

I do believe in our state, once before land went way up and then the bubble "popped." Is it a bubble again? I don't know. Also, it can be a rather illiquid investment. If I were a wealthier man, perhaps I could justify it just to have a nice piece of land to walk on.

I don't feel I understand land well enough to make th leap...so I listened to my father and stayed away from it.

And I think all farm land is "location, location, location" just as they say about rental properties. So you would have to know your particular area well. Just my thoughts on it.
If one views farmland as just another income-producing asset (as Warren Buffet seemed to for his son's farm) it could disappoint. Then again, some farmers (actively working, not just land-holding) are making a lot. It seems to me that there is more risk and more work than a 3-Fund Portfolio.

But if you inherit the land (paid for), it's extremely attractive. Rent is $250+ in lots of Iowa. Taxes are, I believe around $20-30/acre. A little for insurance, a little for the CPA. Just make sure you have a good tenant. My folks could survive on their share of the rent + social security, and they own 1/3 of the land my grandfather had.
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Re: Iowa farmland vs. S&P, 1950-2011

Post by hazlitt777 » Sun Jan 06, 2013 10:29 pm

papito23 wrote:
hazlitt777 wrote:I was seriously considering buying 20-40 acres of Wisconsin farm land as a diversification. But when you do the math, with farm land going for 6,000/acre and with the rent you can get being around $150/acre, that is only a 2.5% return. And that is before taxes on the purchase and taxes on the rent.

I do believe in our state, once before land went way up and then the bubble "popped." Is it a bubble again? I don't know. Also, it can be a rather illiquid investment. If I were a wealthier man, perhaps I could justify it just to have a nice piece of land to walk on.

I don't feel I understand land well enough to make th leap...so I listened to my father and stayed away from it.

And I think all farm land is "location, location, location" just as they say about rental properties. So you would have to know your particular area well. Just my thoughts on it.
If one views farmland as just another income-producing asset (as Warren Buffet seemed to for his son's farm) it could disappoint. Then again, some farmers (actively working, not just land-holding) are making a lot. It seems to me that there is more risk and more work than a 3-Fund Portfolio.

But if you inherit the land (paid for), it's extremely attractive. Rent is $250+ in lots of Iowa. Taxes are, I believe around $20-30/acre. A little for insurance, a little for the CPA. Just make sure you have a good tenant. My folks could survive on their share of the rent + social security, and they own 1/3 of the land my grandfather had.
The idea of owning land is very attractive to me. But it is complicated. Sounds like you have done a lot of homework on this issue. And if you work it as part of a farm, where you income isn't rent based, it may very well be the way to go. Do your due diligence and do what you think is best. All the best.

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docneil88
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Re: Iowa farmland vs. S&P, 1950-2011

Post by docneil88 » Sun Jan 06, 2013 11:24 pm

papito23 wrote: *The Sharpe ratio suggests Iowa farmland has done better than the S&P given the same amount of risk.
It is possible to buy an S&P 500 index fund, but it is not possible to buy an Iowa farmland index fund (or a US farmland index fund).

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ps56k
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Re: Iowa farmland vs. S&P, 1950-2011

Post by ps56k » Fri Jan 18, 2013 5:26 pm

I had seen a couple of TV news stories about local co-ops here in Illinois & Wisconsin,
and the folks that were buying up the land, and then renting it back.
I had looked into one of the farmland LLC's - but the buyin was around $250k -

So - wonder if there are any REIT types that specifically target farmland,
just like some REITs go after residential, commercial, malls, etc -

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Grt2bOutdoors » Sat Jan 19, 2013 12:22 pm

ps56k wrote:I had seen a couple of TV news stories about local co-ops here in Illinois & Wisconsin,
and the folks that were buying up the land, and then renting it back.
I had looked into one of the farmland LLC's - but the buyin was around $250k -

So - wonder if there are any REIT types that specifically target farmland,
just like some REITs go after residential, commercial, malls, etc -
The institutional buyers tend to be pension/private equity funds which have long time horizons and the liquidity necessary to invest in the land - they are known as infrastructure funds.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Iowa farmland vs. S&P, 1950-2011

Post by baw703916 » Sat Jan 19, 2013 12:53 pm

papito23 wrote:
Soil is the hardest of hard assets.
Especially if there's a hardpan layer.
Most of my posts assume no behavioral errors.

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Re: Iowa farmland vs. S&P, 1950-2011

Post by Nate270 » Sat Jan 19, 2013 5:27 pm

Who knows when exactly the bubble will burst. Even if somebody just gave me midwest farmland I would sell it all. The cap rate is so low. You can sell the land and roll it into a simple three fund portfolio and the interest/dividends would exceed the farm revenue, with no work. So many risk variables go into a productive farm (subsidies, weather, tenant, geography), but if your three fund portfolios capital is ever permanentaly impaired its the end of the world anyway.

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docneil88
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Re: Iowa farmland vs. S&P, 1950-2011

Post by docneil88 » Sun Jan 20, 2013 4:43 am

ps56k wrote:So - wonder if there are any REIT types that specifically target farmland, just like some REITs go after residential, commercial, malls, etc -
Hi ps56k, The closest I've found to that is Cresud in Argentina, which sells on the NASDAQ with the ticker CRESY. http://finance.yahoo.com/q/ks?s=CRESY+Key+Statistics and http://seekingalpha.com/article/307631- ... ive-assets . It owns 1.1 million acres of farmland. At today's price of $9.13/share, one acre of that land currently costs $455 vs. $12,000 per acre for prime central Illinois farmland. Best, Neil

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