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[FLM MAY / JUNE 2012 ]Flight To farmland Page 2
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   The Flight To Farmland

  

HISTORIC TRENDS IN TIMBERLAND AND FARMLAND OWNERSHIP IN THE US SOUTH:

A look at the history of forest and agricultural land use in the southern United States may offer some insights. 

In our nation’s infancy, large swaths of timberland were cut and converted to farming. in the 1800s, much of this land was devoted to cotton, which quickly became the primary plantation crop in the South and a significant U.S. export. during this time, the country industrialized and urbanized, creating domestic markets for other agricultural commodities as well. The country’s population also was on the rise, with fewer people growing their own food as we moved away from an agrarian society. instead, the country looked to farmers, who were able to feed the nation, thanks in part to improvements in production, processing, and transportation. 

The demand for farmland did not ebb until a series of events in the 20th Century, beginning with the southeastern U.S. boll weevil epidemic in the 1920s, which devastated an entire industry. a decade later, demand for timberland soared with the invention of the recovery boiler. Kraft mills suddenly became more economically efficient, and the kraft process became the dominant pulping method by the 1940s. Pulp and paper mills began popping up all over the southeastern United States, and mill owners purchased vast acreages of land.

A more recent push to convert farmland to timberland came in the 1980s with the modification of the Conservation reserve Program (CrP), which encouraged farmers to plant fields back into timber. The program had been around for much longer, but the 1985 Farm Bill allowed more land to qualify for the program while also providing greater financial incentives for landowners to switch farmland back into timber.

Now, in 2012, the trend seems to be reversing again in certain regions of the southeast, as timberland buyers are converting properties to traditional agricultural crops for resale, leasing, or to farm themselves.

Who are these buyers and where are they from?  The answer is 

Peanuts are a major crop along the gulf Coast, especially in the Florida Panhandle, where Santa Rosa County, for example, is Florida’s 2nd largest county in terms of peanut acreage and production. Moreover, the peanuts in this area are of such high quality that the majority of them can be used for seed. These areas saw profits that had been averaging about $80-$100/acre skyrocket to an astounding $1,100/acre last year. Helped by substantial rainfall, peanut producers along the gulf Coast experienced record yields last year — up to 6,000 pounds per acre. As a result, some farmers are even converting pasture to peanuts. Importantly, the higher prices have meant windfall profits in the last two years, giving farmers more cash to seek still more farmland.

Farmland also is becoming scarce. The situation is exacerbated by droughts in certain areas — like Texas — which have created booms in other regions. in particular, Texas’ catastrophic drought conditions of the past few years have impacted cotton, peanut, and beef markets. and the situation in Texas may persist for some time, as it may take years for the water table there to recover. as the farmland has become increasingly scarce, agricultural lease rates tripled over the last 10 years, prompting many farmers... Members Login to read the full article»

that just about everyone, including farmers, big agricultural companies, large and small investors alike, and even speculators are part of the mix. Timber REITs and other traditional timber investment groups are taking a hard look at converting portions of timberland into agriculture to further diversity their assets.  meanwhile, existing farmland owners are converting properties that they may not currently have in production. and larger agricultural concerns are looking at timber tracts that have suitable site quality (water, soil, and topography) to purchase and convert. 

WHY THE SUDDEN INCREASE IN DEMAND FOR FARMLAND?

Several factors are driving the hunger for farmland. For starters, national and global demand has increased for many agricultural commodities, particularly edibles like peanuts and feed grains for livestock. This can be tied to the rise in the world’s population, as well as the emerging middle classes in many historically poorer nations, notably China and india. The bottom line is that worldwide consumption is up, and U.S. agriculture has done a good job of marketing globally. 

As a result, commodity prices are dramatically higher. A tight supply nearly doubled cotton prices between 2009-2011, though prices have retreated a bit from the $2/pound high in the spring of 2011. The United States continues to be the world’s third-biggest producer of cotton and the largest supplier of exports to foreign mills. likewise, peanut farmers enjoyed record prices in 2011 (see the USDA graph). 

 
 

 

 

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