More lenders have indicated that many baby boomers are inheriting land from their parents. Most live in urban and metro areas with little desire to actually farm. Will this result in more auctions and how will this trend influence the landscape of agriculture?
First, some baby boomers are returning to their roots to raise their children or to retire from the fast-paced corporate sector. These individuals will usually plot out 20-25 acres to build a country dream home and rent or lease the remainder of the property.
Second, many will continue to live in urban areas and lease or rent the land assets. The goal is to receive a dividend payment in the form of cash rent and allow the land to appreciate. Historically, land in certain areas has been a good investment returning 10% or more appreciation annually.
Third, some boomers are placing the land on the auction block. Who is buying the land? In many areas of the country, it’s the larger growing producer who is coming off some profitable years. They are cash buyers or have a large amount for down payment. Some larger producers, who are the better managers, are quite selective only purchasing land that fits their system with technology to accelerate profits.
In some areas, it is the smaller traditional producers who are relocating. They have sold property for development and they can afford the higher prices, but now are farming as smaller entities.
Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected].