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What's Supporting Farmland Values? Part 1

Cathy Maurer |

What’s Supporting Farmland Values? Part 1
Although off their highs, U.S. farmland values have held up remarkably well. This post discusses rental rates & farm economics in the context of the farmland.

Posted On January 15, 2018
By Brent Gloy
Although off their highs, U.S. farmland values have held up remarkably well.  A continuation of a very low-interest rate environment along with a strong cash rental market appear to have been some of the factors that have made the strongest contribution to this trend.  I discussed some of these trends at the recent DTN Ag Summit.  You can download my slides here.  This and a subsequent post will provide a summary of my comments.  The first discusses rental rates and farm economics in the context of the farmland market and the subsequent post will examine farmland valuations.

It is important to understand that our perspective on the land market is driven by a belief that the farmland market is ultimately driven by economic decisions.  While people may cite a number of reasons to justify farmland purchases, in the long-run we believe that economic decisions dominate.  In other words, expectations of future farmland earnings and opportunity costs (interest rates) are the primary drivers.  As a result, those are the factors upon which we focus most of our attention.  The biggest challenge with this view is that expectations can, and do, change rapidly.  This being said, let’s take a look at some of the economic fundamentals in the farmland market.

Farm Profitability and Economic Conditions
It is no secret that commodity prices and farm incomes have fallen from the highs seen in the early 2010’s.  Although fertilizer prices have fallen and farmers have reduced capital expenditures, farm budgets remain tight.  One of the factors that have contributed to these tight budgets is stubbornly high cash rental rates.  This is not to say that rents haven’t adjusted at all.  Figure 1 shows that annual percentage change in cash rental rates for average quality Indiana farmland.

Figure 1.  Annual Percentage Change in Cash Rental Rates for Average Quality Indiana Farmland, 1976-2017.

We can see from Figure 1 that 2016 produced a substantial (-11%) decline.  This was preceded by a slight decline in 2015.  However, the declines ended in 2017 when rents edged up slightly.  We have discussed this chart numerous times in the past, and the lessons remain the same. First, rent declines are not all that common. Second, although not all that common, during times of financial distress rents can fall by a significant amount.  At this point, it appears that the conditions have not been unfavorable enough to trigger even bigger declines in cash rents.

Figure 2 shows that cash rental rate measured in dollars per bushel of expected production. This was constructed by dividing cash rent by the expected production on average quality Indiana farmland.  It has not been adjusted for inflation but has been adjusted for changing yields.  One can see that today’s rental rate of $1.27 per bushel of expected production is well off its 2013 high of $1.53 per bushel.  So rents have come down, but it remains an open question of whether the decline is sufficient to account for commodity price declines.

Figure 2.  Cash Rent Rate per Bushel for Average Quality Indiana Farmland, 1976-2017.


To examine this issue a bit further we calculated the budgeted expected return to farmland before cash rent.  This measure subtracts all budgeted costs except land rent from budgeted returns.  We then normalize it by dividing by cash rent.  So a value of 100% means that the farmer would expect to pay all of their costs and be left with 100% of their cash rent.  Values over 100% result in a budgeted economic profit, whereas values below 100% represent a budgeted economic loss.  These values are shown for average quality Indiana farmland in figure 3.

Figure 3.  Expected Return to Farmland as a Percent of Cash Rent, Average Quality Indiana Farmland 1991-2017.



In 2017, the expected return to farmland as a percent of cash rent was 14% and unchanged from 2016.  This means that at budget time, farmers expected to generate enough returns to pay all of their costs and only 14% of their cash rents.  It is obvious that this value is very low in the context of the data since 1991. However, it is not unusual for this value to fall below 100%.  The average over the time period shown is 72%.

This means that in order to pay all their costs, farmers must produce yields or commodity prices better than budget or have better cost control than budget.  If not, the cash payments to rent must come from reduced spending in other areas, most likely capital equipment replacement.  I often say that if things go according to budget, farmers can expect to pay for either their land or their equipment, but not both.  One has to question how long such a situation can persist.

Farm Financial Conditions Continue to Deteriorate
The tight budgets facing farmers for the last 4 years have taken a toll on farm financial conditions.  We have discussed this in numerous posts (1, 2, 3), in the last year.  Perhaps the most striking figure that we have shown illustrates how the working capital in the farm sector has dropped.  Figure 4 shows working capital in the farm sector from 2012 to 2017.

Figure 4. Working Capital in the U.S. Ag Sector, 2012-2017f.


Due to ERS’s update, the chart differs from the one in the previous post and the slide deck.  In particular, ERS increased its estimate of the working capital in the farm sector by $17 billion dollars from February 2017 to November 2017.  This is a large increase and projected improvement, but the general conditions and conclusion that would be drawn don’t change significantly.  The amount of working capital in the sector has dropped sharply.  In short, farmers do not have the liquid financial reserves that they had in previous years.  This will likely reduce farmer willingness/capacity to purchase additional farmland from existing cash reserves.

The decline in farm sector liquid cash reserves is mirrored by a reduction in longer-term borrowing capacity in the sector.  The debt service ratio is shown in Figure 5.  The debt service ratio indicates the proportion of the value of farm production that is used to meet principal and interest payments. Today, 27% of the value of farm production is consumed by principal and interest payments. This ratio has clearly been higher in the past, but the times in which it was higher were generally characterized by difficult financial times in agriculture.

While it is most definitely true that one can only learn so much about financial conditions by looking at aggregate data, the trends are not heading in a direction that would suggest farm financial conditions are improving.  In short, one wonders how much additional borrowing capacity lies in the farm sector.  As finances become tighter is will likely make it more difficult for farmers to purchase farmland.

Figure 5.  Debt Service Ratio, U.S. Agriculture, 1970-2017f.

Wrapping it Up
When examining farmland values, it makes sense to begin by looking at cash rental rates and farm economic and financial conditions.  Cash rental rates have seen some declines, but one must wonder whether more are in store.  Under recent budgets, expected income is not sufficient to pay cash rental rates and all other costs. The means that farmers are most likely subsidizing rental rates through reduced spending on capital expenditures and working capital erosion.  Of course, higher yields and better price can help ease this situation, but the aggregate data suggest that in aggregate farmers have not had such an experience.

Combined with continuing pressure for lower cash rents, farm financial conditions have deteriorated in the last 4 years.  This has likely reduced the capacity of the sector to purchase farmland.  Overall, the factors discussed in this post don’t paint a favorable picture for farmland value increases.  However, rents have remained relatively high.  As long as rents continue to hold at high levels, farmland prices will remain supported.  Given crop budgets and financial conditions, one must wonder how long rents can remain at levels that don’t appear to be economically profitable.

To answer the question posed in the title “What’s supporting farmland values?” the data here suggest it’s unlikely to be current farm economic and financial conditions. Perhaps it is expectations of better times ahead.  However, it is also likely a function of the low-interest rate environment.  We will discuss this in another post when we examine farmland valuations in more detail.

What's Supporting Farmland Values?? Part 2

Cathy Maurer |

What’s Supporting Farmland Values? Part 2
In a recent article on land values, we began the discussion by examining cash rental rates and farm financial conditions. This week we look at farmland valuation

Posted On January 29, 2018
by Brent Gloy
In a recent article on land values we began the discussion by examining cash rental rates and farm financial conditions. This week we look at farmland valuation.

Current Valuations Remain High
Because of our belief that farmland prices are ultimately driven by earnings expectations and opportunity costs we frequently examine farmland valuation with the farmland price to cash rent multiple.  This expresses farmland price as a multiple of current cash rents.  In other words, if the multiple is 25, farmland is priced at 25 times that current cash rental rate.  This valuation measure is shown in Figure 1.

2018 farmland values. ag economic insights

Figure 1.   Cash Rent to Value Multiple, Average Quality Indiana Farmland, 1975-2017.

2018 farmland values. ag economic insights

According to the Purdue Farmland Value survey, the 2017 cash rent multiple for average quality Indiana farmland was 34.  This meant that average quality Indiana farmland was currently being valued at 34 times the cash rent.  As one can see, this is among the highest multiples seen in the data, but off slightly from recent highs.  While this graph is made from Indiana data, similar multiples would be seen in the USDA data for most corn belt states.  The essential point is pretty clear.  Today, investors are willing to pay more for current earnings than at most times in history.

There are a variety of reasons that one might be willing to pay a high multiple.  First, you might expect that these current earnings will grow in the future.  For instance, if you expect cash rents to grow rapidly, paying a high multiple for today’s earnings would be sensible.  However, as we discussed two weeks ago, current economic conditions don’t suggest that rents will be increasing rapidly in the near future. In fact, they have been trending slightly lower.  However, one must remember that conditions can change rapidly.  Perhaps investors expect that earnings will increase in the future.

Interest and Capitalization Rates Remain Low
Another reason that people are willing to pay a high multiple for farmland is that the other options available to them are not attractive either.  We often examine this by looking at interest rates on alternative investments as a proxy for opportunity costs.  If the opportunity costs for capital are low, investors are often willing to accept low rates of return on farmland.  This is best seen by taking the inverse of the multiple, which is commonly called the farmland capitalization rate.  It is calculated by dividing cash rent by farmland prices.

In figure 2 we show the capitalization rates for farmland in three different states and the interest rate on the 10-year U.S. Treasury bond.  The farmland capitalization rates were calculated from USDA surveys in Indiana, Illinois, and Iowa.  The chart shows that since roughly 1985, farmland capitalization rates and U.S. Treasury bond rates have fallen.  Today, farmland capitalization rates are slightly higher than the interest rate on 10-year U.S. Treasury bonds.  This strong relationship provides fairly strong evidence that the high multiples paid for farmland are a function of the generally declining interest rate environment of the last 2 to 3 decades.  In other words, it appears that one reason capitalization rates are low (and conversely multiples are high) is the overall low interest rate environment that we are experiencing.

2018 farmland values. ag economic insights

Figure 2.  Farmland Capitalization Rates and the Interest Rate on 10-Year U.S. Treasury Bonds, 1967-2017.

2018 farmland values. ag economic insights


How Might Changes Impact Farmland Values?
Another way to look at the relationship between interest rates, returns, and farmland value is to examine them simultaneously.  This relationship is shown in Figure 3.  Here, we graph farmland value on the vertical axis.  Along the horizontal axis are different cash rent values.  The red, blue, and green lines farmland values under different capitalization rates. These values are found by dividing (multiplying) the cash rental income on the horizontal axis by the capitalization rate (multiple).  Three capitalization rates 3% (blue), 4% (red), and 5% (green) are shown.

The black lines (which are labeled) illustrate the current level of cash rent and farmland values.  As one can see the current land value and cash rental rate intersect the 3% capitalization rate ($6,928/$205 = 3%).  One can use this graph to think about what would happen if capitalization rates or cash rental rates were to change.  For example, if one were to expect higher (lower) rents and a 3% capitalization rate, land values would move up (down) the blue line.

2018 farmland values. ag economic insights

Figure 3.  Illustration of Average Quality Indiana Farmland Values Under Alternative Cash Rents and Capitalization Rates.

2018 farmland values. ag economic insights

Likewise, one can also think about how changing capitalization rates would influence values.  Increases (decreases) in the capitalization rate would push values below (above) the blue line.  If the capitalization rate increased to 4% values would fall to the red line for any given level of income.

There are a couple of important points to make here.  Because we are at very low capitalization rates, small changes in either income or capitalization rates can have a very large impact on farmland values.  For instance, in capitalization rates were to increase to 4% and rents stayed the same, land values would drop from the blue to red line.  This would put them at a $5,125 per acre as opposed to $6,928.  Likewise, at a 3% capitalization rate every dollar change in income is worth roughly $33 per acre of value.  With low interest rates investors do not put much of a discount on future income.  As a result, change in either in income or rates can have large impacts on values.


Relationship to Commodity Prices
Sometimes we are asked how this relates to current commodity prices.  With a couple of assumptions one can draw a similar graph with corn price on the horizontal axis.  In order to do this we need to make an assumption about how cash rent relates to gross revenue.  In this example, we will assume that farmers bid cash rent at 30% of gross revenue.  While one can quarrel with this assumption, let’s use that value for now.  As an aside, we would argue it probably should be lower if anything, but we will leave that for another day.

Given that rent would account for 30% of gross revenue and the estimate of current yields on average quality Indiana farmland of 169 bushels per acre we can calculate the implied corn price.  For example, a rent of $205 per acre divided by 30% yields an implied gross revenue of $683 per acre.  At a yield of 169 bushels per acre, this implies a corn price of $4.04 per bushel.

farmland values. ag economic insights

Figure 4.  Illustration of Average Quality Indiana Farmland Values Under Alternative Implied Corn Prices and Capitalization Rates.


Figure 4 is based on these calculations.  One can see that current situation with a 3% capitalization rate implies a long-term corn price of $4.04 per bushel with a long-term rent to gross revenue ratio of 30%.  This graph can be used in a similar manner as the one shown in figure 3.  One can see that if land values were to be maintained at current levels, but with a 4% capitalization rate the long-term corn price expectation would have to rise significantly, to roughly $5.50 per bushel.  Likewise, a decline in long-term corn price expectations to say $3.50 per bushel would shave roughly $900 per acre off of values.

Wrapping it Up
Overall, farmland in many areas of the country appears to have held up well, despite the farm economic downturn.  Although there have been slight declines in cash rental rates, farmland buyers have continued to pay a high price for current earnings.  The capitalization rates on farmland remain near the lowest levels seen in the last 40 years.  This has coincided with interest rates that are also at very low levels.

At present, it appears that stubbornly high cash rents and low interest rates are supporting farmland values.  As we discussed in part one of this series, cash rents are likely to remain under pressure and farmers financial conditions are unlikely to improve until commodity prices recover.  Given current return levels, it does not appear that farming is profitable at most prevailing cash rent levels.

The low interest rate environment and associated low capitalization rates on farmland are also providing strong support for farmland values.  Because rates are so low, relatively small changes can have a large impact on prices. If rates were to begin to move upward, this could put considerable pressure on farmland values.



Farmers and their family members own or control about 61% of the 911 million total acres in U.S.

Cathy Maurer |

Farmers and their family members own or control about 61% of the 911 million total acres in U.S. farms of which 400 million is cropland.

by Anna-Lisa Laca

Wall Street type investment firms have found out what most farmers have believed for years—farmland is a good long-term investment. More institutional-type investors are likely to enter the picture and buy land as many farmers, who would have vied for the property three or four years ago, are holding back and hanging onto their cash.

So, what does this mean to the ag community? It depends on the firm and how its land purchases play out.

Some of the investment firms buying land lease it back to the farmer so he can continue to operate. This is a standard practice for Indianapolis-based US Agriculture, according to Brian Wise, director of acquisitions for the company. In the process, the grower’s relationships with his retailer and other suppliers usually stay intact because the firm is acting only as a landlord, Wise explains.

On the other hand, if the farmer’s crop-input records, yields and financials are less than positive, the investment firm may opt to lease the land to a new operator--who may or may not work with the original farmer’s suppliers.

Large-scale purchases of cropland by investment firms often deliver a jolt to farmers and agribusinesses in the area. One that captured headlines earlier this year was the sale of 8,638 acres in Illinois to Denver-based Farmland Partners Inc. The firm purchased the land at auction with a bid of $55.311 million dollars.

The land was offered in 46 total tracts, ranging from 15 acres to 597 acres. Farmers showed up to bid, but large investors held the greatest interest and sought the entire land purchase, according to R.D. Schrader, president of Schrader Real Estate and Auction Company.

“The operators were in the room, (but) the investors won out,” Schrader said in an interview with AgWeb.

In a written statement, CEO Paul Pittman says Farmland Partners will negotiate new lease agreements for the land among multiple tenants. Who farms all those acres is likely to change in some cases based on the sheer magnitude of the land purchased.

While investment firms are purchasing farmland, they still own less than 1% of the $2.5 trillion U.S. farmland market, according to Bruce Sherrick, University of Illinois professor of farmland economics at the TIAA-CREF Center for Farmland Research.

Farmers and their family members own or control about 61% of the 911 million total acres in U.S. farms of which 400 million is cropland. That’s according to the 2014 USDA-ERS survey, Tenure, Ownership, and Transition of Agricultural Land (TOTAL).

TOTAL estimates one-tenth of the 911 million acres outside of Alaska and Hawaii, about 91.5 million acres, is slated for ownership transfer in the next five years, not including farmland that is in or is expected to be put into wills. About 21 million acres of that land is expected to be sold to a non-relative.

“Farmland has always been a valuable resource, but what we see in the most recent TOTAL results is the emergence of farmland as a future investment,” notes Joseph T. Reilly, USDA-NASS administrator.

Investors, such as Farmland Partners’ Pittman, are banking on the expectation that increasing global demand for food will keep land values moving upward in the years ahead, despite some softening some areas have experienced the past year. The United Nations predicts the worldwide population will reach 9.7 billion people by 2050, and correspondingly, food production will need to increase between 50% and 100%. It’s just one of the reasons a common saying among some institutional investors is that buying and holding land is like having “gold with a coupon.”

Pongamia...Is This the Tree Crop That Saves Florida Agriculture?

Cathy Maurer |

Is This the Crop That Saves Florida Agriculture?
If you’ve driven through central and southern Florida over the last several years, you may have wondered why much of the land that used to grow oranges and grapefruit in central and southern Florida now sits fallow and choked with weeds. Most people are aware of the fatal citrus greening disease that has caused one of the greatest agricultural disasters in US history.  Almost every remaining grove in the Sunshine State is infected with this disease as researchers struggle to find a cure with little to show for results. In 2017, the growers who were still in the game were spending between $1500-$2500 per acre in expenses to coax a profitable citrus crop out of their dying groves. These efforts were met with almost ideal growing conditions and by all accounts it appeared that their efforts would be rewarded with one of the best crops they’d seen in years. Until the arrival of Hurricane Irma which went through Florida like a chainsaw leaving no grove untouched.

Damage reports indicate that half or more of the unripe fruit is now laying on the ground while what remains in the trees is bruised or will eventually drop off in the coming weeks. And if that wasn’t bad enough, many groves were left standing in water far beyond the critical 72 hours which is almost always fatal for citrus trees. Directly and indirectly, Florida’s citrus industry creates almost 45,000 jobs which translate to almost a $9 billion contribution into Florida’s economy. Today’s citrus industry has shrunk by well over half from its peak in the late ‘90’s leaving rural towns and communities distressed and struggling to survive as families and individuals move away to find work elsewhere.  There are only 7 remaining processing plants in the state and it is highly questionable how many will remain open and viable when ultimate crop losses may be as high as 80%-90%. There’s a point where it does not make economic sense to salvage the remaining fruit in a grove or open a processing assembly line for the smallest harvest since the 1940’s.

Like any commercial real estate, ag land is generally priced as a function of its income earning value plus any development potential. Citrus grove and that used to be valued at $10,000 - $15,000 or more per acre now sells for less than half to a third of that. But why can’t some other crop fill this void?  It’s not for lack of trying. South Florida’s hundreds of thousands of acres of sandy, shallow soils and rainy climate narrow the field of viable crops that can be profitably grown in those conditions. Afternoon rains continually flush fertilizers and chemicals out of the soils, into the drainage canals, and ultimately Florida’s coastal estuaries and Everglades. In spite of these challenges, many growers and outside investors have ventured into some alternative specialty crops such as peaches, blueberries, tomatoes, and strawberries.  Establishment costs, however, are very high.  In the case of blueberries, it could exceed $15,000 per acre! To make matters worse, growers have found themselves struggling with a diminishing supply of farm labor. And finally, whenever prices spike higher from either early season prices or if there is a production shortfall, floods of cheaper imports arrive in a matter of days from Mexico and South America.

So what can work in Florida’s unique agricultural ecosystem?

There is one ray of hope that shows great promise of restoring ag land values and revitalizing business in South Florida’s rural towns. In 2011, an enterprising group of entrepreneurs from a company called Terviva began approaching some of the state’s largest citrus growers to establish some trial sites with a tropical/subtropical tree crop called pongamia. Pongamia is an oilseed tree that is native to Australia and India. Conceptually, the crop is like growing soybeans on trees, but at yields 8x-10x over the best Iowa farmland. Pongamia is not new to Florida. At the turn of the last century, it was introduced as a landscaping ornamental and today a few of these trees can still be found along the turnpike, shopping centers, and in parks in south Florida. Creating a viable agricultural industry from scratch is not an easy task, but it has been done. Soybeans were unheard of until they were introduced in the early 1930’s and palm oil trees were developed from the rubber plantations in Southeast Asia after WWII. Interestingly, products from pongamia are thriving industries in India where the oil is used for industrial applications like fuel, lubricants, paints, surfactants, biopesticidal horticultural sprays, and more.  The “cake” or “meal” that remains after the oil is extracted is coveted as a great fertilizer that releases its nitrogen slowly so a plant can utilize it better. In India it is used to suppress soil-borne pests like nematodes that are the arch enemy of many of our food crops. So what is the path to prove the viability of a new crop in the US – especially in such a challenging geography as Florida? Below is a checklist of the gauntlet it had to run.  

Will the tree grow here?

This was the first order of business Terviva set out to prove to growers when they arrived in 2011. The first grower who would listen to them was Ron Edwards CEO of Vero Beach – based Evans Properties. Edwards, former COO of Tropicana and co-founder of SoBe Beverages and Blue Buffalo Pet Foods, has a track record of spotting a good management team, a good business model, and an idea that had a good shot of succeeding.  Skepticism was high so Terviva offered to split the costs of the first trials. The result was beyond expectations. Growers such as Graves Brothers, US Sugar/Southern Gardens, DNE, Alico, Mosaic and others soon followed. Around the state, the tree grew well in diverse sites with sandy soils, toxic soils, saline soils, and even Mosaic’s challenging clay reclamation soils. In 4 years the trees were 10’ to 16’ in height. The trials have shown that these trees survived hurricanes Mathew and Irma, 2 weeks in standing water, frosts, non-irrigated fields, poor soils, higher-salinity irrigation not suited for most other crops, sand, clay, pests, and heat. Indeed, pongamia can deal with Florida’s challenging climate and soils..


What are the costs to grow it? 

Establishment costs are very similar to citrus. Indeed, the first thing that growers notices was that the tree could literally be dropped right into the existing citrus infrastructure. The trees cost about the same as citrus and the planting densities are equal to or slightly less than citrus. Some growers literally planted between the stumps of former orange trees. To date in Florida, no pesticides have been used. This hardy tree has grown through a laundry list of tropical and subtropical pests that growers spend millions of dollars on to control. The biggest annual expense is weed maintenance until that young tree can get some height and eventually shade out a lot of the undergrowth which can subsequently be managed with mowing. So annual maintenance costs tally to about $400-$500 per acre – about one third or one fourth of what citrus currently spend. Some growers used a small amount of fertilizer, and many used none at all.  Pongamia is a legume so it enriches the soil by making its own nitrogen.

How is it harvested?

Almost all of the fruit and vegetable crops grown in Florida need manual farm labor and every year that has been more difficult and costly to come by. Conversely, a crew of 2 and a nut tree shaker like those used on pistachios or almonds can harvest a pongamia tree in 3-5 seconds. Those cost benefits accrue directly to the bottom line. For the past 2 years as some of the young trees have produced pods early, Terviva has put on grower demos to show how easy and fast the tree can be harvested. 

Who’s going to process it?

The beauty of the pongamia industry is that everything about it is low-tech. The tree puts out a pod that is easily shelled with a nut sheller and crushed with conventional soybean crushing equipment. It doesn’t require elaborate $100 million processing plants or exotic enzyme formulations to make it work. The bean inside that pod looks about the size and shape as a lima bean. It consists of about 40% oil and the 60% balance is the remaining seedcake. In 2017, the forward-thinking Hardee County IDA and its head, Bill Lambert, unanimously voted to build the first pongamia crushing plant in Florida. Because of the elite varieties that Terviva is cultivating at various commercial greenhouses in the state, an acre of their trees is conservatively estimated to yield about 400 gallons of oil and almost 3 tons of seedcake!

Who’s going to buy the products?

This is where it gets interesting. There is a long buffet of diverse markets for this oilseed tree crop and therein lies one of its greatest advantages. These profitable markets range at the low end from a feedstock for industrial oils, to feed, and all the way up to highly-valued biocontrol products for the organic agriculture. Organic growers have long been familiar with the benefits of pongamia’s oil and meal products under the Indian name karanja. Like soy, pongamia oil is a long-chain C18:1 compound that can readily be refined into biodiesel or bio- jet A fuel. Those tests have been tested and validated by Shell, Valero, REG, and ARA Labs. Refiners view a pongamia crop in Florida as a new oilfield that faithfully produces oil every year. Fuel is the base-case end market and can produce fine investment returns. Classified as a politically correct “non-food” feedstock it can be used to make biodegradable polymers such as fracking fluids, plastics, detergents, paints, and other industrial products. Secondary compounds found in the oil have documented and long used in India as extraordinarily effective biopesticides as good as or more effective than more commonly known neem products that are widely used by organic farmers, gardeners, and in the fast growing cannabis industry. Because of the lack of need for inorganic chemicals used in growing pongamia, these high-value end-products are in growing demand by organic feed and growing operations. Sales into these channels alone can double or triple the value of the cake and oil. The seedcake or meal can be further refined to produce a (30%) high-protein animal feed, or simply be used as an environmentally-friendly, slow-release 4-1-1 fertilizer that plants can better utilize. Because the backbone of the oil shares similar properties to various food oils, scientists have told Terviva that the secondary compounds could be stripped out to upgrade the oil to “food quality” which could be of great value in parts of the world where pongamia could be grown on a footprint not adaptable to traditional oilseed crops.

Business 101

The arrival of the pongamia farming model into the staggering agricultural void created by the citrus greening disease could be a classic business school case study. The trail has been blazed. A deeper dive into this business model reveals some very unique attributes.  The trees high yields offer an extraordinary margin for error in any given crop year. For many alternative oilseed row crops planted elsewhere in the US (often as a new rotational crop), the entire growing season can tolerate few hiccups or else the yields will have a difficult time justifying the risks of planting and new machinery investments. Pongamia’s low annual maintenance costs also allow a lot of margin for adverse weather surprises. Pongamia’s diverse downstream markets mitigate marketing risks. Low-tech processing that can create products from fuel and feed to fertilizer and biocontrol horticultural sprays can allow plenty of flexibility to target up-cycling markets and reduce dependency on single consumer markets. And depending on those markets, Terviva estimates that at maturity, the groves could generate a net income between $700- $1500 per acre. What would the ideal replacement crop look like if it showed up at growers’ doorstep? Probably something like pongamia.


Author: Tom Schenk
Ph: 877-278-9003

Gurthie County Iowa 208 Acre Sale

Cathy Maurer |

On 9/26/17 a farm auction of 208 acres in Guthrie County, Iowa was auctioned off by Peoples Company.  The farm was 87 CSR and 100% tillable.  The farm sold for $14,100/acres or $162/csr point.  A young farmer in his early 30's bought it.  There had been 5 farmers bidding at $10,000/acre.


Adjacent landowner got a deal on this one....

Evan Lemenager | | Illinois

What a deal... 

Upcoming Auction....

Evan Lemenager | | Illinois

Upcoming Auction: Farmland acquired in 19th Century by Sen David Davis set to auction by family....

A few tracks of land still selling way too high.....

Evan Lemenager | | Illinois

Four properties selling way too high....

December 2014

Evan Lemenager | | Illinois

The sky is falling, the sky is falling. We all heard the story of Chicken Little. A recent report by Iowa State reported that farmland values are falling, down 8.9% from one year ago. Just what many were waiting to hear to be able to say I told you so. I don’t want to add fuel to the fire, but the values reported in the Land Sales Bulletin statewide average value for the short term perspective (basically values by quarter as reported on page 9 of section one) are down 7.9% for all sales combined from the beginning of 2014 and ranges...

October 2014

Evan Lemenager | | Illinois

As we all know the next sales season has begun, but unfortunately for the Land Sales Bulletin we don’t see the actual results until after the sale close’s which most haven’t yet. If you have a moment email me any “unofficial” results at, it would be greatly appreciated. For example 160 acres in Lafayette County, WI sold at auction in mid October for $12,500 per acre to an investor. The buyer owns considerable holdings in the area and was adding on. This is as good of corn farm as you will find, no matter what state you are from (No that is not a misprint, it is 200+ bushel corn ground and it is located in Wisconsin). This was substantially higher than the seller expected and I was told a farm family was the contending bidder.

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