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City slickers invest in farmland

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Feb 10, 2005
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Southern Manitoba
City Dwellers Plow Money Into Farmland
Investors who might not know a tractor from a silo are hiring farmers to do their bidding.
By Stephanie Simon
Times Staff Writer

February 20, 2005

MALVERN, Iowa — In 32 years of farming, Roger Wyant has learned how to judge a piece of ground. And he judged this one to be a lost cause.

It was a rugged 100 acres, all rough, steep hills overgrown with wild grass. Wyant figured that was how it should stay. But the Florida businessman who owned the pasture insisted that it be tamed, turned into neat rows of money-making corn. So Wyant gave it a go.

He ended up with a crop of thistles.

"I tried to reason with him," Wyant said, "but it was his land."

That's a refrain heard more and more these days across the heartland.

Big corporations have long dominated the poultry and hog industries. They dictate every detail of animal rearing, down to the shape of the barn, leading critics to deride modern livestock farmers as "serfs" or "hog janitors."

All the while, grain farmers like Wyant remained self-sufficient. They made their own decisions and took their own risks.

But that autonomy is fast eroding.

Seeking steady, secure investments to round out their portfolios, big-city investors are increasingly buying Midwest farmland, spending $100,000 to $500,000 per field.

Many hire professional farm managers to maximize their profits. The managers, in turn, hire farmers like Wyant — sometimes offering them a stake in the crop but often paying them by the hour (or the acre), like a hired hand.

Farmers can make decent money this way; many welcome the stability of such work. But they also risk losing the independence that attracted them to farming in the first place. They turn over decisions about pesticide, fertilizer, erosion controls — even the number of seeds they should plant — to professional managers. They waste days on farm beautification projects ordered by absentee landowners.

They're no longer farmers; they're tractor drivers.

Even if they retain some decision-making power, they have to deal with landlords second-guessing them.

"They're always hassling about what you're planting or how much fertilizer you're putting on," said Gene Ferguson, who raises wheat, corn and beans in southeast Kansas.

Ferguson works for a dozen landowners — renting from some, hiring his labor out to others. "It's like your dad breathing down your neck when you were a kid," he said. "I started farming in '74, and it was a lot more fun back then."

Back then, farmers often share-cropped or rented ground. But they tended to work with neighbors and retired farmers who trusted them to make their own decisions.

Iowa and several other states protect farmers' independence with laws banning corporate ownership of agricultural land. (Corporations can, and do, own livestock; they then contract with farmers to raise the animals on the farmers' own land.) Increasingly, though, lawyers, doctors and developers are coming to rural land auctions or bidding by conference call, seeking to hit pay dirt on distant bean fields. They spend more than $3,000 an acre in parts of Iowa; land prices also are rising steadily all across the Midwest.

"People who have no idea where the land is and no concept of how to farm it outbid me by 50%" to buy a field at auction, said Brian Andrews, who farms in east-central Illinois.

"To those of us out here who see farming as our life as well as our livelihood, it's a little irritating," he said.

Ag-land investing has accelerated in the last five years; with the stock market volatile and interest rates low, farms have gained appeal as a reliable way to grow money. Across the U.S., farmland values have risen every year since 1987. Investors can also pocket annual profits from crop sales, usually a return of 3% to 5%.

For investors who also happen to be sportsmen, farmland may offer good terrain for hunting deer or wild turkey. And many find it deeply satisfying to stand in a sun-dappled expanse of corn and know they own it.

"It isn't an investment that exists only in the Wall Street Journal. It's something you can see and walk on," said Lee Okeson, a retired city planner from San Diego who owns farms in Iowa, Minnesota and North Dakota.

In Iowa, close to 40% of the agricultural land sold last year went to investors, many of them from out of state. That's a dramatic shift from just a decade ago, when investors bought less than 20%, said Mike Duffy, an economist at Iowa State University.

The result: Here in the heart of the Corn Belt, a majority of the folks who own farmland are not themselves farmers.

Some are the widows and children of farmers, hanging on to the family land out of sentiment. Others are investors like Horace Bertelsen, a retired physician living in Monte Sereno, Calif., who owns 1,000 acres in Iowa.

"My dad always told me, 'They're not making any more land,' " Bertelsen said.

To oversee his farms, Bertelsen hired Pat Hengen, a professional farm manager with Farmers National Co. Hengen grew up on a Nebraska farm and studied agricultural science in college. He has an easy rapport with farmers, chatting about the level of zinc in the soil and the threat of soybean rust.

But Hengen also makes sure the farmers he hires do things his way: He buys the seed and tells them how thickly to plant it; he orders the fertilizer months before they'll need it; he reminds them that if a landowner plans to visit his property, the weeds had better be mowed.

Hengen tries to keep the landlords' demands reasonable. Investors have told him, over the years, that they hoped to turn their cornfields into vineyards, or nurseries, or wild game preserves. He tries to dissuade them from such follies. In the end, though, if the owner insists, Hengen will find a farmer to do it.

Wyant not only ripped out the wild grass in the pasture-turned-thistle-field, he also uprooted the trees that dotted the steep slopes because the owner thought they looked out of place on a farm. Wyant tried to tell him the trees prevented erosion by holding down the topsoil. But he couldn't protest too much.

"You have to abide by what they want," Wyant said, "or else they'll go somewhere else to get it done."

These days, farmers can't afford to get on a landowner's blacklist.

A mid-size tractor costs $120,000. A combine harvester, used just a few weeks a year, runs at least $225,000. To afford such equipment, farmers need to work as many acres as possible.

"It's a constant battle to find enough land to generate the income we need," Wyant said.

That's why, on a recent afternoon, Wyant sat at his kitchen table with Hengen, a dozen of his cows nosing the frozen ground just outside the window. Hengen pulled out the map of a 280-acre parcel owned by an attorney from Illinois. He offered Wyant a chance to work the field as a hired hand.

Wyant didn't have to think a full minute before agreeing.

The loss of autonomy bothers Wyant some; however, hiring out his labor also has its benefits: He's paid for his work, no matter how the harvest turns out. "It gives me a little bit of security," he said.

Advocates for family farmers warn that if outside investors continue to buy up land, it could have profound effects on rural America.

Already, there are fewer and fewer families to anchor the vast fertile plains of the Midwest. One farmer today takes care of as much ground as eight or 10 farmers did a generation ago. When that farmer has no stake in the land or the crop, he has less incentive to tend the ground carefully, to preserve its resources and habitats.

"It's a tremendous change," said George Naylor, who farms in west-central Iowa.

Duane Neill has seen those changes up close — and has made peace with them. He and his father started working with professional farm managers decades ago, when it was much less common.

His seed-company cap pulled down low, Neill consulted with Hengen this month about a 120-acre parcel he farms along the Missouri River bottom in western Iowa, sharing the costs and splitting the profits with the landowner, who lives in Omaha. Hengen asked when he'd last seen the owner.

"Must have been a few years ago," Neill said. "He comes flying down through the farm in this Cadillac, dirt flying everywhere."

"Looked like city folk, huh?" Hengen asked.

"You know how he smokes them cigars?" Neill continued. "He's smoking one and telling me: 'By God, it looks like you're doing a good job farming this place.' "

Neill chuckled at the memory. He didn't resent it. He owns a mid-size farm nearby and has no relatives to turn it over to when he retires.

He figures he'll have to rent it out — and become an absentee landlord himself. The thought seemed to tickle him.

"I might be the one flying through the field in a Cadillac," Neill said, grinning. "With a big old stogie."
Farming is starting to take on a different odor, and I don't like it. The regular fulltime farmer can't buy land due to all the city slick investors. It is resembling old Europe when you had the land owner and all the peasants working for him.
Take away the subsidies and it would be a whole new ball game!The farmers in the east are selling their land at subsidy inflated prices then coming into ranch country paying prices that will never pencil out for livestock operations.All it does for the young couples is to raise their taxes to an imposible level.
I have been in farming since the mid 60s but I'm not sure if my son and hang on. He is a very hard worker and I have instilled in him a love of the land and a work ethic beyond anything the city slickers can even imagine but the good groung that comes on the market is being sold to "investors " at 10 times the value it really has. Then they do as you say and try to run it as a factory and end up ruining a lot of it. I saw the same thing in the late 70s and when the bust came much of the $4,000 per acre ground sold in the early 80s for $400 per acre and we had the largest number of bankrupcies ever.
If we don't learn from history we are destined to repeat it. The bust will come - - - right now over seas money is continuing to run things up but at some point it will come back to reality.
Yep.have you seen how the beautiful valleys in the Black Hills area have been getting ruined in the past 25 yrs. with all the development! Would not want to ranch there if one could with all the people around!!

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