Executive says value of U.S. farmland will grow

Increasing global demand for food will drive up the value of farmland in the United States and other countries with large agricultural exports, a land management executive said Wednesday in Las Vegas.

While the world’s population has grown from roughly 900 million to more than 6.1 billion in the last 200 years, the number of U.S. food producers decreased from 4.3 million to 4 million during that period.

That’s going to keep return on farmland investment around 11 percent, said Randall Pope, president and chief executive of Westchester Agriculture Asset Management.

The Champaign, Ill.-based firm has $2 billion in direct farm ownership in 11 states and oversees another $2 billion in investment.

“If you can’t live with that, don’t put your money in,” Pope told about 200 people attending the Realtors Land Institute 2013 National Land Conference at the Flamingo. “(Investors) still put money in because they know what they’re buying and they know where it is.”

Farmland values increased 6.2 percent annually over the past 60 years, with a spike in prices from 1975 to 1985. Unlike the stock market, there’s only been one crash, he said.

And American farmers are much more productive today than they were 200 years ago. Productivity grew at about a 2 percent annual rate for the last 20 years and will need to reach 3 percent to keep up with demand.

“We’re demanding more from less,” he said. “I would suggest in the next 20 years, land will not be the limiting resource for farmers. It’s water.”

Americans spend roughly 10 percent of their disposable income on food, which is “pretty amazing” when you consider that it’s 43 percent in Pakistan, 35 percent in Thailand and 30 percent in India, he noted.

The United States has always had plenty of grain supplies, typically 60 to 90 days and as much as six months during some periods, Pope said. It now has a six-week corn supply, according to the latest report from the U.S. Department of Agriculture.

“That’s why you’re seeing large price increases in grain products,” he said. “World corn demand ... it’s feeding those animals, going into chicken and beef that’s feeding those people.”

Pope estimated that there is $8.3 trillion of “investable” farmland in the world, including $2 trillion in the United States.

Westchester has diversified its portfolio by going into other countries such as Australia, Brazil and Argentina, but there are more risks involved in those countries, he said.

For example, farmland is going for $700 to $1,100 an acre in Brazil, but the closer you get to the Amazon River, the more environmental land has to be set aside.

And while people talk about Illinois farmland being high at $12,000 to $15,000 an acre, he said it’s $30,000 an acre in England.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.