Partnering with U.S. Farmers to Access Land and Capital

Posted by on April 12th, 2017 | 0 Comments »

The high value of land makes it difficult for up-and-coming farmers, such as Charlie Baucom, to expand their operations. This is particularly true for young farmers or new farmers who are less likely to have a significant amount of capital. Photo credit: Bentwood Farms

In 2014, a farmer named Charlie Baucom wanted to expand his business, Bentwood Farms, beyond the 5,000 acres of corn, soybeans, wheat and canola he farmed in North Carolina. Like many up-and-coming farmers in the U.S., the high price of farmland posed a formidable obstacle to Charlie’s expansion plans.

U.S. farmland and ranchland is some of the most valuable agricultural land in the world.  The high productivity potential of the land is enhanced by a knowledgeable farming community, the availability of technology and highly innovative seeds, crop nutrients and machinery and a sophisticated transportation infrastructure to move products to markets. In addition, farm land is usually kept in families and rarely available on the open market

While there are established debt financing options available to farmers, there is a limited amount of equity capital sources for farmers to purchase land, buy equipment or make improvements to their land.

Charlie decided his best expansion option was to rent more land. Renting is a way for farmers to grow their operations without incurring debt. Bentwood Farms began a relationship with Farmland Partners Inc. a publicly-traded farmland real estate investment trust. Renting from a publicly-traded company lowers the risk of the farm being sold and gives Baucom a longer-term opportunity to rent and manage the land.

Capital Investments for Productivity and Sustainability

About 39% of the farmed ground in the U.S. is rented; less than 1% is owned by institutional investors. State laws restricting institutional investment in land can hurt farming communities by depriving farmers access to affordable sources of capital. See the 2016 GAP Report for more about initiatives helping farmers access land and secure tenure around the world.

Institutional land investors, such as Farmland Partners, build long-term relationships with farmers and invest in the productivity and sustainability of their operations.

Farmland Partners has made capital intensive improvements to Charlie’s farms that he otherwise would not be able to make, including an upgraded water management system on a 2,106-acre property he rents in South Carolina. The farm has excellent soils and the region has a long growing season, but the farm was not able to reach its maximum yield potential due to flooding in mid-spring and excessive heat in the summer.

Surface drains, ditches, center pivot irrigation and a subsurface tile system were added to drain the soils of excess water during rainy seasons and recycle it during hot weather to keep plants cool. This system facilitates an earlier planting date, resulting in a longer corn growing season and the ability to plant a second crop of soybeans on the farm each season.

There are environmental upsides as well. Because the water exits the field at the same point, it’s easier to control nitrate removal and avoid phosphorus and potassium loss by eliminating runoff issues.

Re-designing the surface of the farm also allowed Charlie to go from farming 85 separate tracts, to farming five large fields. Now the entire farm can be managed as a single unit reducing the planting time from seven days to just two. Yields on the South Carolina farm increased from 120 bushels of corn per acre to 250 bushels. They are also able to double-crop and get 25 to 30 bushels of soybeans per acre, without spending on additional crop nutrients.

This “win-win” partnership has enabled Bentwood Farms to afford a higher rental amount on the additional capital Farmland Partners has invested, while improving farm productivity and profitability without taking on additional debt.

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