Buyers not put off by rising price of Southeast Missouri farmland

With a weak dollar and a shaky stock market, farmland is becoming an increasingly appealing investment.

Agricultural real estate broker Ken Cantrell of Cape Girardeau has a long waiting list of potential buyers looking for farms in Southeast Missouri. They aren't put off by record land prices, either.

Quality cropland in the Bootheel has nearly doubled in value over the past 10 years, according to annual surveys conducted by the University of Missouri's Agricultural Economics department.

"Land is just a good investment nowadays," Cantrell said. "People are still afraid of the stock market. Bank interest is not paying very much. Land's not going anywhere."

He said his biggest problem right now is that there's not enough agricultural property on the market to satisfy demand. At recent auctions, he's had buyers from California, Minnesota, Louisiana, Tennessee and Arkansas looking to buy Southeast Missouri farmland.

A farm in New Madrid County recently sold at auction for $800 per acre more than the owner expected, Cantrell said. A 100-acre farm in Mississippi County sold for more than half a million dollars.

"I just don't know how to price them anymore," he said shaking his head.

Rising commodity prices are the primary factor pushing land prices higher, Cantrell said.

A growing middle class in China and India is now consuming more meat, which drives the need for more grain to feed pigs and cattle, Cantrell said. China and India are also driving up cotton prices as they seek to purchase higher quality clothing.

"I got into this in 1973, and the last few years is the only time I've seen all commodity prices high," Cantrell said.

According to the Chicago Board of Trade, during the past year corn prices have increased 81 percent; cotton prices, 54 percent; soybean prices, 38 percent; wheat prices, 23 percent.

Both farmers and outside investors see the income potential the prices promise, Cantrell said.

A 2010 survey by the University of Missouri's Agricultural Economics department showed good cropland in the Bootheel counties of Mississippi, New Madrid, Dunklin, Stoddard, Pemiscot and Butler had the highest values in the state. The average price per acre was $4,019, nearly double the state average of $2,888.

In 2000, the same land was valued at $2,086 per acre, according to MU's annual surveys of lenders, rural appraisers, real estate agents and MU Extension specialists. The per-acre price in the Bootheel has risen by more than $400 since 2008.

Good crop land in the Cape Girardeau, Scott and Perry County areas was valued at slightly less than the Bootheel counties, at $3,719 per acre last year, according to the survey. The 2010 price is down $188 per acre from 2008 but nearly two-and-a-half times higher than it was in 2000.

While prices are going up, low interest rates are making it easier for people to afford to finance greater purchase amounts, said Ron Plain, professor in the University of Missouri's Agricultural Economics department. Operating expenses for farmers are also going up, but not at a rate higher than the rise of commodity prices, he said.

Fifth-generation farmer Randy Brazel of Buffalo Island, Mo., owns 1,400 acres in Mississippi County, most of which he bought in the past 36 months.

"The rest of the economy has become so unstable, people are seeking security and land is probably one of the most stable assets," Brazel said.

He's partnered with people outside the agriculture industry who wanted to invest in land and has put together the 3,400 acres he farms in Southeast Missouri, Southern Illinois, western Kentucky and western Tennessee.

"There's a lot of money outside agriculture that's coming in. I see that continuing," he said. "The more unstable the economy gets, the more comfort there is in agriculture, especially in an area like Southeast Missouri."

Farmers who lease land typically either pay cash rent or pay the owner a portion of the crop's profits, Cantrell said.

"At today's prices, a good farm will pay the landowner from $250 up to $300 [per acre] depending on what crop is grown there," Cantrell said.

Last week, Cantrell traveled to the Birds Point-New Madrid Floodway. Although much of the water from the May levee breach has receded, he said, it's still too early to tell what the impact of flooding will be on land prices.

After previous floods in other areas, he described watching as farmers tried to use a bulldozer and a plow to try to turn the sand from a 10-foot-tall, half-mile-long deposit into the soil.

"It's just a mammoth task," he said.

Despite the uncertainty of the timeline to rebuild the levee and the damage that may have been done by the levee breach, in this market, Cantrell said, land there would sell quickly.

"I have some clients that would purchase some ground in that area and take the risk," he said.

mmiller@semissourian.com

388-3646

Pertinent address:

County Road 206, Cape Girardeau, MO