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US labor availability a ‘growing investor concern’

People’s Company president Steve Bruere says the talent gap may widen amid accelerated urbanization, which others see as a driver behind sustained farmland valuations.

Between 2000 and 2016, the US rural population fell for the first time on record, according to the US Department of Agriculture.

In its annual report on rural America, the USDA wrote that 46 million of the nation’s 326 million people currently live in the 72 percent of US land area classified as rural. Persistent outward migration of young adults, ongoing urbanization and increased mortality among working-age adults have all contributed to a 200,000 person net decline in overall rural population since 2000, the authors wrote.

“Long term population loss continued in counties dependent on agriculture, in the Great Plains, Midwest and southern Coastal Plains. Agriculture and mining are still major rural industries in terms of production and revenue. But due to productivity gains within those industries and more rapid growth in other sectors, they now provide less than 5 percent of wage and salary jobs in rural areas.”

The USDA said that the soaring rate of urbanization – from 35 percent in 1900 to 86 percent today – has often left counties that have remained rural with limited economic potential.

“That’s becoming a bigger issue for us when we are trying to put deals together”
Bruere, People’s Company

On Gladstone Land’s third-quarter earnings call earlier this month, chairman and chief executive David Gladstone called urbanization the main factor supporting land valuations in areas where his firm operates. He stressed that the areas formerly devoted to agriculture that are now hosting schools, homes and factories are unlikely to ever revert back to being farmland.

“California, for example, has been losing about 58,000 acres of farmland to development each year for many years now. This causes the farms we own to be highly sought after by farmers and they can rent it for decades without ever being vacant.”

While urbanization and migration are factors that have long contributed to the population trends in rural areas, the USDA labels the increased mortality among working age adults as an “unanticipated trend.” Though rural mortality rates for the population overall have continued a downward trajectory, the increase in deaths of working-age rural residents has played a role in suppressing rural population growth, according to the department.

“Between 1999-2001 and 2013-15, rural mortality increased more than 20 percent for 25 to 29 year olds, from 135 to 165 deaths per 100,000 people,” the report’s authors wrote. “Rising rates of prescription medication abuse, especially of opioids, and the related rise in heroin-overdose deaths, are contributing to this unprecedented rise in age-specific mortality rates after a century or more of steady declines.”

People’s Company president Steve Bruere told Agri Investor that he has not encountered anything having to do with opioid abuse in the course of his company’s work managing farmland, running auctions and sourcing deals for institutional investors.

While the high percentage of farmland owners at or approaching retirement age continues to be the most dominant demographic trend influencing the farmland market, Bruere noted, labor issues influenced by migration and urbanization have started to play a bigger role.

“There’s a real talent gap, between where the agricultural markets may be, where the populations that you are going to sell your product to are and where the work force is located,” he said. “That’s becoming a bigger issue for us when we are trying to put deals together. You can find areas where there’s great productivity, but there may not be the employment base to exploit the productivity.”