What does the future hold for your agricultural land or your ability to get more of it?
Our practice at Jacobsen Orr, by virtue of our presence at the epicenter of some of the best agricultural land in the world, deals with farmland and ranchland issues on an almost daily basis. We are asked to become involved with agricultural real estate issues for both landowners and tenants. Some of our landowner clients are producers who also work the land that they own. Some are owners who are retired farmers or ranchers that lease to a family member or a non-family tenant. Some are landlord owners that live far away from the land and who have no active involvement in its agricultural production. In many cases, our producer clients are interested in expanding their operations with more owned or leased land. The “non-operator” owners of land, whether they are retired farmers or ranchers, or owners with no experience as active producers, are an important and rapidly changing part of the mix of agricultural land ownership. We have observed that these folks are a key to the future availability of this important asset to the next generation of farmers and ranchers.
While it is well known that the average age of active farmers has continued to increase, and that the overall number of active farmers has decreased in the past century, the effect of these trends upon how land will be transferred to the next generation has not always been well-quantified. In 2014, the USDA’s Economic Research Service (“ERS”) and the USDA’s National Agricultural Statistics Service began a new national survey to gain information on a number of issues relating to farmland. The survey was called, “Tenure, Ownership and Transition of Agricultural Land (TOTAL) Survey 2014” and it results in a very large dataset which is discussed in a number of summaries that can be found on the USDA ERS website.
There are some important trends for our agricultural landowners and their tenants to consider that come from the TOTAL survey results:
- Farm real estate is about 80% of the value of all farm sector assets, totaling $2.38 trillion.
- 39% of all agricultural land is rented. Of this, about 50% of cropland is rented and about 25% of pastureland is rented.
- In the Corn-Belt, 40% of the rented land is owned by non-operator landlords.
- Of the 911 million acres of farmland in the contiguous 48 states, 61% is operated by the landowner (557 million acres), 8% is rented from other farm operators and the remaining 31% (238 million acres) is rented from non-operator landlords.
- Of 191 million acres owned in individual or partnership arrangements, nearly half were held by a retired farmer or rancher in 2014, indicative that many landlords have prior farming or ranching experience.
- Most tenants have more than one landlord.
- From 2014 to 2019, about 10% of all farmland (93 million acres) will be transferred, most of which will transfer by gifts, or by operation of wills or trusts. Only about 25% (about 21 million acres) of this property is expected to transfer between non-relatives. See the charts below:
Of course, this is data developed from nationwide surveys and “your own experience may vary,” depending upon your part of the country. However, this dataset gives us some objective information about what to expect in the near future, as well as questions that should be considered. What opportunities exist for those who want to acquire agricultural land for leasing or ownership? What are the opportunities for restructuring land ownership in existing farming and ranching operations, and in terms of succession and estate planning?
One thing is certain, the old adage about agricultural land that, “They aren’t making any more of it,” still rings true. With the prospect of needing to feed and fuel a planet that will be carrying 9 billion people in the near future, the stewards of the land in the next generation have some interesting issues to consider.
At Jacobsen Orr, we look forward to helping you with your farming and ranching real estate issues, estate planning, succession planning and other agricultural legal issues on the road ahead.
 For Nebraska, IANR has great resources: See,e.g., http://agecon.unl.edu/realestate/2016-farm-real-estate-report