Farming is big business in Arkansas, forming the backbone of the state’s economy. Pumping $16 billion in the state’s economy each year, agriculture is the biggest industry in the state, impacting virtually everyone in the state.
In Arkansas, producers are diversified, planting rice, cotton, soybeans, wheat and other crops. Other producers are invested in beef cattle or dairy farming. There are also aquaculture producers, raising catfish and goldfish.
But agriculture has a wider impact beyond crop production. It has given rise to a whole range of industries, from equipment manufacturers and dealerships to aerial applicators. Farmland has a major financial impact, and investing in farmland has become a major asset for diversifying portfolios.
According to Dr. Bruce Sherrick, University of Illinois at Urbana-Champaign professor and director of the TIAA Center for Farmland Research, farmland is a unique asset — being large-scale and very diverse in terms of location and crop production.
“It’s a very heterogeneous asset,” Sherrick said.
Historically, farmland has been a farmer-to-farmer market, he said. That is still largely the case for the $3 trillion farmland market. However, institutional investors have grown their presence, with financial institutions like Bank of America having specialty asset-management divisions to oversee investment and management services for wealthy individuals and families, as well as pension funds investing in farmland.
Farmland investing got a bigger profile in early 2021 with the revelation that Microsoft co-founder Bill Gates had become the largest farmland owner in the United States. Per reporting from the Land Report, Gates and his wife Melinda own 268,984 acres of land, most being farmland, with 47,927 acres in Arkansas — equivalent to 17.8 percent of their total land holdings.
Jeffrey Hignight, a farmland asset manager and real estate broker with Glaub Farm Management in Jonesboro, said most institutions and investor groups focus on purchasing 1,000 acres of land, while individual investors and farmer-operators typically focus on acreage under 1,000.
While the amount of property being purchased may vary, the reasons for buying are largely the same — namely that farmland offers stability and diversification. As Ben Wellons, president and broker at Little Rock’s Wellons Real Estate, puts it, “Farmland in Arkansas can produce stable and consistent income returns for investors/buyers, and for the most part does not show dramatic up or down swings in profits or valuations.”
Wellons noted that many of the sales occurring through his firm have been through larger private or public investors “needing an outlet for disposition of cash,” while there have been some individual investors making inroads into farmland.
Hignight agreed, pointing out that farmland offers “attractive long-term total returns” while providing diversification and offering an asset that produces a product. The biggest difference among investors, in his view, will be the attachment to the land.
“Institutional investors are primarily seeking total returns and diversification while an individual investor may have more specific ties to a region from being raised on a farm or resides in a rural area and understands the investment opportunity in farmland,” he said.
Gar Lile, president and principal broker of Lile Real Estate Inc. in Little Rock, also pointed out the ancillary benefits of investing in farmland. He emphasized the production capacity of a row-crop farm, which allows investors to compound their profit margin.
Robert Eason, co-owner and principal broker of Mossy Oak Properties and Delta Land Management of North Little Rock and Leslie, estimates that good farmland in Arkansas can provide more than $150 per acre of cash rent each year. “I deal a little bit with a stock portfolio, but there’s not many of them that are producing more dividends like that,” he said.
There’s also the possibility of adding hunting clubs or turning part of the land into recreational property that adds additional value and profit potential.
“I think you get the best of both worlds. You know, you can’t go play in the stock market or play with your stocks, but with farmland, timberland and recreational property, you can,” Lile said.
Global and national economic conditions are spurring many to invest in farmland to park cash and keep a steady value. Eason discussed the specter of inflation, which he said was driving clients to snap up farmland.
“It might go up and down and in overall price, but you know, you’re always going to get some sort of return, and it’s not going to go to zero. Most of the guys that we deal with believe that we’re headed towards an inflationary timeframe, and farmland is going to be a really good asset then if that does happen,” he said.
Sherrick corroborated the inflation concerns, saying that farmland prices are increasing across the United States due to the possibility of post-pandemic inflation.
“It’s very clear that the prices are going up a little bit again, historically, with very strong consistency. So that turns out to be a motivating factor, given that people seem to be concerned about the possibility of returning inflation to the post pandemic,” he said.
Getting your hands on farmland is sometimes easier said than done. Both Hignight and Lile referred to the Arkansas farmland market as “thin,” with few tracts of land available for sale. Arkansas Farm Bureau estimates that the state has 14.5 million acres of workable farmland with 18,778,660 acres of forest land and 49,346 farms operating in Arkansas. Of this land, Hignight estimates that less than 1 percent is sold on the open market each year.
“Many tracts of land that we have sold are at the third generation ownership level. Grandparents bought the farm, and now the grandkids are selling due to the dilution factor. Others are shorter term but in general, cropland is held for many years,” Hignight said. “The current market leans towards a seller’s market. Demand for land is up while the supply is limited. Anyone with quality cropland will obtain a strong price on the open market.”
While Lile said it was a good time to have farmland on the market, he sees few sellers motivated to get rid of their land. This is largely due to a satisfaction with the returns and stability the land offers.
“This is a very good time to put your property on the market to have a market analysis done by a broker,” Lile said. “The market is very thin, so it’s a good time for someone to put their property on the market. You’re not having to worry about prices on the stock market every day.”
While farmland is a stable, tradition-driven industry, there are some companies looking to innovate in the field. One of the newest innovators in the farmland investing space is Carter Malloy and his company AcreTrader, which enables investors to buy shares in rigorously selected farms around the United States.
Malloy founded the Fayetteville-based startup in 2018 and has seen its fortunes rise in a few short years, increasing the number of farmland investments on its site by a factor of 12 in 2020 alone and raising more than $5 million in seed funding.
But what interests Malloy is increasing access to farmland and getting the highest-quality investments. Before founding AcreTrader, Malloy began investing in farmland and was frustrated by the opaqueness of the process.
“There’s not a lot of information out there, and there’s not a common systems or data infrastructure across the industry,” he said.
Malloy had a “holy cow” moment when he realized that he could increase investment opportunities to farmland, which he calls a “great American asset,” online. At the core of the company, Malloy focuses on access, liquidity and transparency in the investment process, stressing that the process should be a well-informed one for buyers and sellers.
AcreTrader provides this by working with farmers themselves. As Malloy said, the farmers know the property better than anyone else, and the company works to improve the land and manage it.
“We are thrilled to come in and invest in that land and improve the quality of that land. And ultimately that helps to improve the farmers’ operations,” he said. “The largest source of growth for our company has been successful partnerships alongside farmers that recognize the value in what we do.”
No matter how farmland investment changes with technology, there will always be a drive to buy more land, according to Eason. Both investors and farmers will be driven to purchase that adjoining piece of property or high-producing cropland.
“It seems like people are going to continue to buy. I think we’re always going to have your private investors. They’re always going to be purchasing. There’s not a landowner or a farmer out there that I know of that, if something comes up next to them, they’re not going to at least try to buy it,” Eason said.
“What I say about farmland or land in general, is that stocks might go to zero, bonds might go to zero, but land is not going to go to zero.”