A $600bn agricultural land market has opened up for American auctioneers as vendors turn to the rostrum for the disposal of their property.
The recent sale of Paloma Ranch in Phoenix, Arizona, was the largest ever American agricultural auction. The 64,000-acre cotton and wheat ranch was entered by a single vendor and sold for $35.5m.
Increased activity in the auction room reflects the quickening pace for farmland investment following years of stagnation.
Rapidly growing land values in the 1970s were then depressed by high interest rates, causing values to drop by up to 70%. But since 1987, increases in exports, drought and rising commodity values have seen values rebound. “Farmland now offers investors long-term returns at minimum downside risks,” claims Gene Klingaman, president of auctioneers Schrader Westchester, “and the farmland investor can also benefit from the impure nature of farmland as a commodity.”
According to Klingaman, market imperfections in US agricultural regions are especially extreme at present.
In Champaign County, Illinois, prices for land of similar quality and status has ranged from $1,600 per acre to $2,800 per acre.
The next key market indicator is due on February 22. Spear Circle Properties have entered a 2,230-acre farm near Imperial in Nebraska for auction by Schrader Westchester.
As is customary in America, bidders have to register their interest before the sale and prove they have the funds to make the purchase. However, the fall of the gavel is as binding a contract in American law as it is in English.
