This years farmland rental survey for Iowa shows about what you would expect, a substantial raise in cash rental rates for farmland, in fact the most substantial on record.  No surprise given we always just experienced the large gain in farmland value in 2011 as well.  Rents still  have not kept pace with the 32% land value increase we saw last year and even, while the value of land increased 32% rents only increased 18%.  If you read DreamDirt enough you may remember when the last land value survey came out I’d noted that farmland values and rents were out of step with each other.  Rents will always be slow to follow values because it requires changes, some which may be governed by contractual agreements and certain legal deadlines.  For example if you have a farm leased today and you wanted to change the rent you can not do it this crop year, you’ll have to wait til the next crop year and by then a new land value survey will have come out.  Iowa State University puts the Land Value Survey out in December and the Rental Survey in May, however tenancy termination are due to renters prior to September 1st of each year and the new rental year starts on March 1 in Iowa.  My point is, it can be difficult to keep in step with rents and nearly impossible to get ahead of them.

This years increase of 18% or $38 per acre has taken Iowa to an average of $252 per acre.   The pervious high was set last year with a $30 increase in rental rates.  Now thats a statewide figure so you’ll want to look at the charts on the Iowa Farmland Rental Rates for 2012 and find the district you own a farm in.  The report is broken down by 9 reporting districts.  Its also worth bringing your attention to Flexible Farm Lease Agreements.  These agreements have become very common and allow the landowner to share in profits in ways they can not with set cash rental rates for farmland.  You can find some very useful information on these agreements here : Flexible Farm Lease Agreements  If a flex agreement is not for you and you are looking for information on straight cash rent agreements you can also find a treasure trove of information here:  Cropland Cash Rental Agreements or if you do not own cropland but have pasture : Pasture Lease Agreements

One final note on this years survey, they have finally added a “HUNTING” category to the rental survey.  If you mull over the survey notice that the final line notes a dollar figure for hunting, this figure is a yearly per acre rental rate.  Its become more popular in recent years to have two separate leases on the farmland you own.  One lease for cropland and one lease for the hunting rights.  This offers you a little additional income when you split the rights.  Cash rental rates for hunting varied statewide from $9 per acre to $17 per acre.  Certainly if you intend to do this its advisable to have an attorney prepare your rental contracts so that in the end the are no disagreements or misunderstandings between the two tenants.  I might also mention that its advisable to have your hunters carry their own “hunting lease” insurance and its a smart decision to include this in your agreement.

Any questions feel free to give me a call 712-592-8965

In late April we made a new hire at DreamDirt TV with the addition of Chase Burns from North Henderson Illinois.  I can’t say enough good things about Chase.  Chase is a family man, he and his wife Jackie are as fascinated by dirt and agriculture and country lifestyle as Nicole and I are.  Chase is a talented photographer, an accomplished deer hunter and a leader in west central Illinois land management for deer hunting as the President of the West Central Illinois Branch and Illinois State Chapter of the Quality Deer Management Association.  Jackie has a bachelors degree in Agriculture Education and has been teaching about Agriculture in the public school system in Illinois.

Chase will be responsible for partner development and relationship management for DreamDirt TV and will soon take over all product marketing accounts but will also become a contributor here on DreamDirt.com.  Look for him in the coming months as well his photography from the great State of Illinois.  Be sure you are following us on Facebook to see our photos and announcements.  DreamDirt on Facebook.

In April we began planting our deer hunting food plots and during April 20-22 we undertook a 3 day video shoot that included all things dirt and cameras.  The subject of the shoot was planting.  We had our partners from Jungman Wildlife Supply, Eagle Seed, Conklin on hand and we all had a great time as usual.  Our “circle” continues to grow so its great to have some new faces around too!  Corn planting was in full swing, despite a wet first day we still managed to get all the corn and Eagle Seed Soybean plots planted and a bonus acre of sweet corn!  Nicole even talked Brent from Jungman Wildlife Supply into putting his new 7 foot rototiller to work in her garden while he was here.  Saved me from a long job with the Toro man killer tiller!A new addition was a partnership we have formed with a local aviation company that offers DreamDirt a unique perspective and fast transportation!   We’ve nicknamed it “The Dirt Bird” A super way to see the world in a whole different way than you can from the ground.

Finally in April we also kicked off a project to completely rebuild DreamDirt.com and bring some great functionality to the website.  We’ve looked forward to this project for a long time and its exciting to see our ideas coming alive on the screen of some of the most creative and talented web designers.  Our final product will be a website unlike any other in the world of farmland.  We look forward to launching it sometime this Summer when its complete.  We promise you, the new site will offer the entire state of Iowa something new, useful and easy to use.

I have lived in Tucson the past 30 years, however I grew up on the family farm in Marion County Iowa. My mom also lives in Tucson and the cash rent from the farm was most of her income. over the past few years we had considered selling the farm just to simplify my moms life, this would have to be her decision and the kids would be willing to help and watch out for her, the biggest problem is how do you find someone that will look out for your interest and not just sell it to get their commission and move on, sad to say it but that seems to be the way a lot of people operate today, anyway,that all changed in January of 2012, it was the night before the Iowa caucuses and I happened to see the news show from Rockefeller Center that was talking about land prices in Iowa, there was a realtor in Iowa named Jason Smith that has a website called DreamDirt.com and is selling a lot of farm land in and around Iowa.

The next morning I checked out DreamDirt  website and got Jason’s phone #, I called Jason and asked all the pertinent questions and explained that this was my moms main source of income. after the phone conversation and some good old on my knees in prayer I called my mom and told her what i found out, well bottom line is this, we told Jason to sell it and sell it he did, my mom is now set for the rest of her life, I cant thank Jason enough, he was a total man of his word and whenever we had questions about anything he was always available and when he said he would cal me back he always did. I had talked to Jason several times over the two months before the auction but had never met him until the day of the auction. I feel that everything from the smallest details in getting ready for the sale right up to and including the auctions was handled with complete professionalism, it was truly a pleasure to work with Jason.   Jason, to you and your team THANK YOU!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

from your friends Gary & Mom

To Gary and Phyllis I know I’ve told you but I’ll say it again, we appreciate good folks like yourself, we appreciate you trusting us and giving us the opportunity.  We know you are the most important part of this equation and I appreciate you letting me earn a commission to sell your farm.  My family knows and understands where the food on our table comes from and the ability to earn a living in a business we love is our blessing.  Thank you both for everything.

I’ve found the top reasons why people would prefer selling directly to their renter:

1.  The perception you can save money on commision

2. The fear that an auction may not produce the result you desire

3. The desire to avoid the public spot light

4. Family ties to the renter, and renters tenure on the property

5. The perception that its “easier” to sell to the renter

My answer is always a resounding “NO” do not sell directly to your renter.  That may sound self serving right, after all I don’t make a commission if you do that.  My answer has nothing to do with my commission or me or my company.  In fact when I say “sell at auction” I give that advice with myself out of the picture.  Good advice is to sell at auction with any auctioneer, its the best advice I can give you.  Auctions have been attributed in many cases including Michael Duffy’s latest Iowa Farmland Value Survey as bringing the higest prices.

My number one issue with selling directly to your renter is this:  You’ll end up in a tense situation thats very hard to get out of, one where you’ll feel tremendous pressure to discount the property.  When ever I am asked the question my exact response is “If you want to get top dollar for your property do not even mention to your renter that you intend to sell your property”  If you do this you’ll begin to feel pressure immediately to arrive at a price.  Now I’m painting with a broad brush because not every renter would be interested in buying and not every renter would pressure you but experience tells me that it happens very often.  The next thing you know your in a situation you did not want to be in.

I recently dealt with a situation where a farm had been inherited many years ago, the owners lived out of state in 3 different states and had approached the tenant about selling the property.  The tenant was more than excited about the prospect of buying it and immediately offered $5500 per acre.  The price seemed lower given the news they had been seeing about Iowa farmland values but the tenant explained to them that their CSR was lower than average, it had no tile on it, it had several wet spots, the access needed fixed, the fences were in bad shape along with a plethora of other things.  They finally agreed to sell it to him for $6000 per acre.  Then one of them gets the idea to do some research and ends up getting me on the phone.  I did a once over on the farm for them, gathered some quick facts.  This 78 CSR farm was far from below average and years of aerial imagry showed no wet spots, topo maps showed to major depressions on the farm.  My estimation was the farm would easily sell for $12,000 at auction, and in the right situation with the right interest and buyers present even more.  After putting 6 hours of research into it they broke it to me they had already agreed to sell the farm for $6000 per acre because they’d felt pressured for some of the reasons above.

If you want to sell a farm in Iowa  or anywhere else the best advice I can give you is don’t say a word to anybody!  Do your research, if you don’t know how to do the research CALL ME, I can help you with all of the research and help you estimate the value of your property.  Even if you do have family ties to the tenant and won’t sell to anybody but your tenant it still pays to have your ducks in a row prior to approaching the person with your proposal to sell the farm.  Armed with information you are more likley to come out closer to where you should be versus just taking your buyers word on the farms value.

Now as far as the 5 reasons noted above I want to address these 5 myths.

1.  The perception you can save money on commision

Paying a commission is likely to make you more money than the commission costs you.  You hire professionals to market and sell your farmland because this is what we do.  We have the knowledge, tools and experience to make sure you get what the property is worth.  There is no way to know how much private sellers end up discounting their farmland selling on their own but I’ve seen sales prices that are 25% to 50% below what I know they would have brought at auction.  With that extra you can pay a commission, plus your capital gains taxes and potentially come out ahead of the sale price you may have gotten privately.

2. The fear that an auction may not produce the result you desire

You may hire an auctioner once or twice in your life.  We understand an auction could be a scary prospect for you but the bottom line is a thoroughtly thought out marketing campaign properly executed and professionally conducted auction will bring you the top dollar for your property.  Auctions have built in safety measures to protect you as a seller and your asset.  We realize we are only as good as our last auction so every auction is the most important to us.

3. The desire to avoid the public spot light

I’ve heard this for justified and unjustified reasons.  Again auctions are as adaptive and flexible a marketing method as their is.  If you have a concern for one reason or another call me and I’ll offer you some alternatives that will still help you take advantage of the auction method and help you remain out of the spotlight.

4. Family ties to the renter, and renters tenure on the property

I understand 100% if you want to sell to your renter, but if you ask me for advice on how to achieve top dollar in this situation I have to give you the right advice.  Hopefully if you renter does want to buy they’ll understand and respect the fact you should get what your asset is worth.  If thats the case they can come to the auction and bid and be the top bidder.  That makes the situation very easy.  If your renter resists the idea of an auction then obviously they do not want to pay you what the property is worth.

In certain cases children have inherited farmland in Iowa and made a promise to a deceased parent that if they ever sold it they would sell it to a certain neighbor.  Its commendable to keep your promises and advisable.  This situation can be dealt with in many ways with an auctions to ensure that you do get what dad or grandpa’s farm is worth.  Realize that when you made the promise you were not asked to sell it for a discount, only that a certain person should get the absolute opportunity to buy it.  Last right of refusal is the easiest way to deal with this situation.  Let the auction arrive at a price and offer it to the person at that price, if they decline sell it to the high bidder at the auction.  This enables you to get the best value for the farmland asset and keep your promise.

5. The perception that its “easier” to sell to the renter

I can’t even argue with this objection, I can’t.  It is easier to call the renter up and say “shoot me a figure for my farm and lets close it”  Bam you hire two attorney’s and wait for your check to arrive in the mail.  I will argue though that its not much harder to call me and say the same thing.  “Jason I want to sell this farm and I don’t want to mess with it, you take over from here and send me a check”  Trust me, you want me to do all the work and make it hassle free for you I’ll take the job everyday!  When you consider that the average 160 acre tillable piece of farmland in Iowa at auctions sells for over $1,000,0000 and at a minimum of 25% discount for selling directly to your renter I’d say a little hassle is worth $250,000 and if you are willing to pay me a commission not only do I get paid but you still end up with more in your pocket.

I’ll close saying that an auction is the best way to sell farmland in Iowa.  Auctions have been credited for helping sellers achieve record prices recently and I can honestly attest to the fact you would never have seen some of the prices you’ve seen without the competition auctions bring including the $20,000 farmland auction in Sioux County Iowa.  Farmland is in great demand in Iowa and we are booking for 2012/2013 auctions now.  Certainly we’d like to visit with you about any farm you want to sell even beyond 2013.  To make sure you meet certain deadlines including tenancy notices required by Iowa law its best to call sooner than later.  You can contact me at 712-592-8965 or drop me an email Jason@dreamdirt.com

The study shows the following value increase in farmland by crop reporting district.

Northwest Iowa farmland rose 11.6%

North Central Iowa farmland rose 12.6%

Northeast Iowa farmland rose 9%

West Central Iowa farmland rose 11.1%

Central Iowa farmland rose 10.5%

East Central Iowa farmland rose 9.4%

Southwest Iowa farmland rose 12.9%

South Central Iowa farmland rose 11%

Southeast Iowa farmland rose 9.1%

The smallest gains were in the eastern third of the state, while the largest were on the western third followed closley by the central third of the state.

Jason Smith, Farmland Auctioneer in Iowa

(712)592-8965

Jason Smith, Farmland Auctioneer in Iowa

(712)592-8965

First, yes land does not always appreciate, almost always but the farm crisis scared the tar out of some folks here in Iowa.  Some lost it all and I mean everything.  Even those that served agriculture failed, implement dealers, banks and it forever changed the face of hundreds of main streets in Iowa.  Those days are behind us, the replay is not coming and I’m going to lay out my thoughts here in pretty simple fashion.  First, two graphics.  The first is a chart of Iowa farmland average prices since 1900

Next here is a chart of world population from 1800 to 2050… this is a 250 year period.

Do you notice any similarities in the two charts?

Now realize that all of these people have to eat, plus they have to have a place to live, plus they have to have a place to work and places to drive.  Whats happening is our population is EXPLODING and our farmland is shrinking.  The earth has about 36,480,000,000 acres of land surface and there are approximately 7,600,000,000 tillable acres of land on earth, that which can grow some sort of food.

The United States, sparsly populated in comparision to many other countries.  6,124,736,640 acres of land mass of which only a portion is able to produce a crop.  In 1997 we had 445,324,765 acres of farmland, in 2002 we had 434,164,946 acres and in 2007 the last figure available we had 406,424,909 acres. These figures include pasture lands as well. You can see its declining quickly by about 2% every 5 years, while our population increases daily.

Considering our population of about 311,591,917 in the US right now there are about 1.3 acres of tillable farmland per person!  Now consider that we are feeding a good portion of the world!  Are you surprised that commodity prices have risen in the last 10 years now?  Are you surprised at the value of land in Iowa now?

I see articles on a daily basis about bankers meeting to has it over, or this or that person is concerned about farmland prices in Iowa… well maybe I’m wrong, but I don’t see it changing anytime soon when you consider what we are up against.  You can talk about low interest rates, strong cash positions, fundamentals, charts, economics all you want but the issue is rather simple, farmland is scarce and dwindling while our population grows at an amazing rate since 1960.

I’ll leave you with one last thought, farming has changed.  Farms are bigger today.  If you look back historically to the land grant days you’ll notice that farms have always grown larger.  You started off with 40 acres and a couple horses.  As machinery and technology changed agriculture you added 40 acres to a farm and had an 80.  Then your neighbor passed away or retired and you bought his 80 and pretty soon 160 acre farms were common.  People left agriculture and the number of farmers has declined, while the number of acres in the remaining farmers possession increased.  Today farms are being “bought” into existing operations, some of them thousands of acres now.  Today those producers are employing the services of estate planners and attorney’s and using trusts to keep farms intact.  The reality is the farms you see selling today likely will never sell again.  Its always been rare to get a chance to buy a certain farm, farms old sold every 50 to 100 years but I suspect as time goes on you’ll see that length of time grow.

I’m not a financial advisor so read my thoughts with that in mind, but simple math tells me that tillable farmland is already more important than gold, try eating your gold when the world population reaches 10 billion by 2050.  Maybe you can make some money buying gold or Apple stocks but I’d say that money could long term do much better in farmland.