California’s agricultural producers welcomed an unexpected deluge after years of direr-than-normal conditions. Popular reaction has also inspired several experts to remind that this month’s extraordinary rain fall does not guarantee wet conditions will continue and in no way negates the need for long-term planning and investment.
A similar theme emerged from certain macro-focused breakout sessions at Peoples Company’s Land Investment Expo, which was held in Des Moines, Iowa for the 16th time on January 10.
Though speakers were no more likely to claim an ability to predict the outcome of thorny spending debates than they were to hazard guesses at next week’s rain forecast, most found reason to acknowledge that a flood of government payments has shaped agricultural investing markets in recent years and seen policy assume almost as central a role as the weather in determining farmers’ outcomes.
The Expo offered a mixture of agricultural, entertainment and political content that saw much discussion center around interest rates, trade, climate and agricultural support policies. Mainstage programming focused in part on detailing domestic and geopolitical challenges to progress. Many breakout discussions drilled into opportunities stemming from policymakers’ ambitious proposals for ag and the broader economy.
Peoples Company managing director Dave Muth was one of several speakers to describe 2022 as a year spent in anticipation of a slowdown that never came. He described nearly “frictionless” farmland markets over the past several years populated by farmers and an active array of institutional investors carrying out a variety of strategies that have only recently seen moderation in the face of rising interest rates.
“Some folks that were pretty aggressive in trying to use leverage in order to take their cash capital and make it as extensible as possible across asset ownership, they’ve had to shift their models,” he explained. “We’re seeing more and more cash deals within farmland and that’s going to hurt their internal rate of return over the long-term, but you can create some additional cash yield.”
University of Illinois professor and TIAA Center for Farmland Research director Bruce Sherrick joked that half the entire conference was devoted to one such source of additional yield; getting paid to sequester carbon in agricultural soils.
In addition to the several panels devoted to the mechanics and motivation for carbon farming that demonstrated its firmly established place on the sector’s policy agenda, part of Sherrick’s presentation described possible spillover effects of the Biden administration’s Inflation Reduction Act beyond the $20 billion devoted to agriculture directly.
That the IRA was mentioned in most discussions and was also the subject of its own breakout panel – which was helpfully illustrated with an image of pigs at a trough – confirmed Sherrick’ s observation that policy has moved from a mere safety net to a more structural component of the US agricultural economy.
Long-time market participants and observers of the policy process surrounding agriculture can rightly claim some familiarity with its rhythms that can – like the weather – be predicted to some degree.
Managers adjusting to an enhanced focus on policy drivers against a backdrop of US political deadlock will nevertheless benefit from investment in their ability to expect the unexpected, the benefits of which California producers currently waiting for the waters to recede can no doubt profess.