Farm Land Sells for MILLIONS Despite Multi-Year Ag Recession

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🌾 A 128-acre Iowa farm in Louisa County sold for $2.1 million at auction — roughly 35% above statewide and county per-acre averages — drawing 46 registered bidders from 12 states. A 79-acre tract of highly productive cropland led the way at $21,050/acre, reflecting strong demand driven by scarcity and farmland's track record of ~12.7% average annual returns from 1970–2021.

🌵 Severe drought is tightening its grip on the US High Plains, with 70% of the winter wheat crop now drought-stressed — the highest coverage since December 2022. Poor pasture conditions and wildfire losses are also forcing cattle producers to liquidate herds, with El Niño rains expected too late to help winter wheat or summer grazing.

🏛️ The USDA is doubling disaster aid payments this week, increasing the SDRP payment factor from 35% to 70% for approved 2023–2024 claims. The application deadline has also been extended to August 12, and the Trump administration is expected to announce measures to address surging fertilizer prices in the coming weeks.

📊 Large money managers were net buyers of 30k corn contracts and 19k soybean contracts for the week ending April 21, per the CFTC's Commitment of Traders report. Funds were net sellers of 3k SRW wheat contracts on the week.

🇮🇷 US-Iran negotiations were called off over the weekend after President Trump canceled talks that were set to take place in Pakistan. Iran is demanding the US lift its Strait of Hormuz blockade before talks resume, while the White House says the blockade will remain in place as maximum economic pressure.

Transcript

Farm Land Values

SPEAKER_01 0:08

Morning guys. It's Monday, April 27th, 523 a.m. Central Time. Grain markets mostly higher this morning. May corn futures up four and a half cents at 459 and a half. May soybeans up three and a quarter at 11.67. May Chicago wheat up four and three quarters at 6.13. May Kansas City wheat up three quarters of a cent at 659 and three quarters. May Spring wheat up three at 679. Before we get into markets this morning, grain markets, we're going to talk about farmland market. Let's go.

SPEAKER_00 0:36

So a 128-acre farm in Louisa County, Iowa recently sold for$2.1 million at auction, well above both state and local land value averages. The sale drew strong competition with 46 registered bidders from 12 states. The auction offered the property in five tracks, combining productive cropland with recreational timber. A 79-acre tract of highly productive farmland generated the most interest, selling for an impressive$21,050 per acre. While fall has historically been the peak season for land sales, strong demand for high-quality farmland is generating robust year-round sales.

SPEAKER_01 1:17

Strong farmland values is nothing new to you guys. The statewide average for Iowa farmland last year was about$11,500 per acre. But when you're talking top or elite ground, it's a totally different ballgame. There was a record sale in December of$32,000 per acre in Sioux County, but these sales around$20,000 or$21,000 have become very uh common for what people would call elite ground. As far as a farming operation is concerned, this sort of valuation or this sort of cost for farmland doesn't make any sense. Um, we're in arguably the fourth year of a farm economy recession. You the University of Illinois projects this will be the fourth year of negative returns for cash-rented corn and soybean operations. So why are people paying up for farmland? There's, I think, four different reasons, and I don't know if these are in any particular order. The first one is scarcity. I mean, land just doesn't come up for sale every single day, especially where you want to own it. So it's not like the SP 500 where you can just jump in and buy it any day of the week. It's uh it's it's very much like time sensitive. Like something comes up that you've been you've been eyeing it for 30 years, and then it comes up for sale. And uh that in in itself drives up the value. Uh, something called a neighbor premium is is what people might call this. If you get an adjoining farm and it comes up for sale and you know you're never gonna see it up for sale ever again, that's a reason to come in and buy. Optionality is becoming a bigger thing. You've got things like solar and data centers, and they're willing to throw out these like super rich uh multi-year, even multi-decade leases in some instances. That's supportive. And then you've got institutional money. Um, the long-term returns in farmland have been really good. Some estimates would indicate that Iowa, the state of Iowa, and farmland there averaged 12.7% returns annually from 1970 to 2021, which is better than the SP 500 with less volatility. So, through the lens of the investor, that's just super attractive. The fact that you can basically outperform like the world's most popular investment and do it with less volatility. Um, so this has become like uh something that people just want to throw in their portfolios. Hey, you want to throw 5% of our portfolio at farmland? It's been fantastic, it's a solid investment. Absolutely, yeah, let's do this. So you can't look at it just as a farming asset, it's just an asset. It's just an asset, is what it is. And the people with deep pockets are looking at it uh in that way. I threw this chart together this morning, and I don't know that I love it because um of the way the axes are set up, but axes are set up. But in any case, you can see like Iowa farmland is has been one of the top performers, but you could throw Illinois and some other states in there would also be uh fantastic. One other thing that crossed my mind, Mackenzie, this morning, this is probably not a popular opinion. If you're an outside investor in farmland and you're looking at it as an investment, one of the things that might cross my mind is that you know what, these farmers are gonna keep paying cash rent because the government keeps giving them money, and the government is basically gonna backstop my investment for that reason. Does that make sense?

SPEAKER_00 4:28

Yeah, most definitely.

Southern Plains Drought

SPEAKER_01 4:30

I mean, I know that's not that's not a probably a popular thing to say, but like if I'm if I'm not a farmer and I'm just an institutional or investment guy, like I'm gonna look at, I'm gonna consider that. Absolutely. Hey, when the farmers have problems, the government sends them money, you know, that's gonna that's gonna kind of backstop me because I'm relying, maybe, maybe in my instance on cash rent for my income to kind of cover this. And a lot of these guys, they don't even care about the cash rent, they care about just the the annualized returns. You know, the cash rent's just uh just icing on the cake. So it's uh it's pretty incredible that farmland is as strong as it is given uh the backdrop of of a multi-year farm economy recession. But uh I think I told you why. And it and it does make sense when you think about it.

SPEAKER_00 5:07

Severe drought continues to grip the U.S. high plains. Dry conditions are threatening winter wheat across the area, with 70% of the crop now in drought, the highest coverage for any week since December 2022. The crop success will largely depend on whether meaningful precipitation arrives in the coming weeks. Meanwhile, the drought, the drought is also hindering efforts to rebuild the U.S. cattle herd. Poor pasture conditions and millions of acres lost to wildfires are forcing are forcing some producers to liquidate their herds. Some areas of the plains received rain over the weekend, but the majority of the region remains dry.

SPEAKER_01 5:44

We've been talking about the drought in the southern plains for weeks and weeks and weeks, if not months now, and uh the major media outlets are are picking up on it now. Um, you guys saw this, and you probably talked about this with Matt on Friday, but um, you look at that dark green stuff in Kansas, that's what we're concerned about as it relates to the winter wheat crop. This HRW crop in particular appears to be in trouble. Uh, you look at the cattle areas and drought, and Mackenzie, you know more about this than me, but uh this is this is primarily the reason for the cattle market being as strong as it is, right?

SPEAKER_00 6:14

Yeah, most definitely. I mean, looking ahead, I mean, there's not going to be any rebuilding. There's just there's no grass and there's no feed. I mean, as I mentioned, the so much land got burned up in wildfires. Uh things just don't look that great. We did get some rain over the weekend, but I mean, we have to have a lot of rain to really compensate for the drought that we're in.

Corn Belt Weather, Markets

SDRP Update

SPEAKER_01 6:31

Yeah, so here's weekend rainfall. This is the last 72 hours. There was some scattered stuff. I'd call it scattered over Kansas and over um parts of Nebraska, but I think the it's probably safe to say the majority of HRW wheat country missed the weekend rains. The forecast for the next seven days is kind of mixed. Some areas will catch some rain again, but some won't. And you could absolutely make the argument that at this point here, it's April 27th. It's it's too little, too late. It starts raining now. I mean, it it may not be enough to really save this crop. We're gonna see crop conditions out from USDA this afternoon. I would imagine that they drop again and they will be lower. The uh the average rating across your top five HRW wheat states was like in the teens. I think it was 14 something percent last week. And we'll have an update for that uh on that for you guys tomorrow. Kansas City Wheat Futures uh posted fresh highs on Friday up to 686 and a half in the July 26th contract. You've still got an open gap at 609 and three quarters, but the market doesn't care about that right now. The market cares about the drought situation and the uncertainty regarding the crop, just how bad is it? Uh spring wheat futures also acting very well, posted fresh highs overnight in this September new crop contract up to 713 and a half, kind of following along. And they've got some some weather issues of their own up there. It's been cold. Um, I think things have been delayed in some areas. Um, here's cornbelt rainfall over the weekend to kind of switch gears. So Iowa was fairly dry, Illinois was fairly dry. There were there was probably some progress made in a lot of these areas. We do have, I know some places still needed to dry out. We do have some rain on the radar this morning over kind of like south central Iowa, northern Missouri, um, parts of Kansas, parts of Illinois. So we're we're kind of active here this morning. The forecast favors rainfall in like uh the central Corn Belt, mainly Illinois and Indiana over the next seven days. There are also some very dry pockets of Kentucky and Tennessee uh that are supposed to see some rain here over the next seven days. We'll see if they hit. You look at uh Iowa, and Iowa's been wet, especially in the eastern part, and it's been slow. But aside from the system that's moving through here this morning, they're not supposed to see much over the next seven days. So the state of Iowa could certainly catch up in terms of planting progress. I don't think it'll do it in a week, but it could happen pretty fast. Uh December corn futures are up this morning, and you've got a trend line that sits at about 491 and three-quarters. That may act as a little bit of resistance. Um, farmer selling has emerged the last couple times. We went up into the 490s. You may see that happen again. November soybeans are acting well. You've got a big double top at 1174 that we uh tested on a couple occasions, and we'll see if we can go up and test that again. So the markets are, I'd probably argue maybe adding a little bit of risk premium. Maybe the wheat stuff has something to do with it. You still got crude oil sent to 96 bucks. That's probably helpful as well.

SPEAKER_00 9:15

The USDA is doubling disaster aid payments to farmers. Beginning this week, the agency will issue a second top-up payment to producers with approved 2023 and 2024 claims under the supplemental disaster relief program, increasing the payment factor from 35% to 70%. The SDRP application deadline has also been extended from April 30th to August 12th. In addition, the Trump administration is expected to announce measures in the coming weeks aimed at addressing surging fertilizer prices. While these efforts are unlikely to provide short-term relief, they are intended to increase long-term supplies through expanded domestic production.

SPEAKER_01 9:55

And then we kind of knew this was coming eventually. Premium subs. Paul Nefer is going to be on tomorrow to explain this to us. And I may throw out a mailbag request if you guys have uh questions about it.

SPEAKER_00 10:05

If you guys have not checked out our premium content here recently, you sure need to do so. Joe, can you tell our viewers about some of our recent premium videos?

The Funds

SPEAKER_01 10:12

Our good friend Shea Folk from Ag V Solutions is doing a ton of stuff with AI, and uh, he did another update on this on Friday. I feel like our premium crowd and myself also are kind of torn on this. Like, should I do I need to be using AI in my farm operation? Like me personally, am I using it for some content stuff and for some graphics here and there? Yeah. Have I like found anything that's like a total game changer for what I do day to day? No, I haven't. I'm I'm still a skeptic, and I think it's because I'm I may be too old for this. And um, all I'm seeing is like people are making spreadsheets, and then they're like turning, they're like, oh, this now it's an AI spreadsheet and it's got fancy graphics, but it like does the same thing. I don't know. You guys will tell me I'm wrong, I'm sure. Um, Jim was on uh macro Thursday last week and uh talked about the housing market, oil, uh his thoughts on grains. Jim's been a professional trader for 40 years. Uh he works in Chicago, he's been in the pits at the board of trade. His um commentary is it's a fan favorite. People love listening to Jim talk about markets. He he's been very much spot on in terms of his investment thesis. His interest rate comments are very important. He's he's basically a bond trader. Um, Matt Bennett was on for a 20 questions segment on Wednesday last week. We talked about 27 production prospects, how the fertilizer situation plays into all that, uh, weak prices. Chris Barron was on, talked about hidden farm interest costs last week. Ryan Bennis was on, talked about calculating insurance payments and uh how this new stuff is all gonna work. We had just tons of great stuff last week. We got more coming this week. If you guys want to see the premium stuff, go to standardgrain.com. You can sign up this morning. I know you're busy, you're in the truck, you're in the tractor. It takes 30 seconds to sign up on your phone. Everything that we send you comes via email and you can access super easy on your phone. You're gonna open the email, you're gonna click to play the video, and that's it. There's no uh messy login instructions, nothing like that. Give that deal a shot this morning, guys. Uh, you will like what you see, I promise.

SPEAKER_00 12:04

The CFTC released its weekly commitment of traders report on Friday for the weekending Tuesday, April 21st. Large money managers were net buyers of 30,000 corn contracts and 19,000 soybean contracts. And then lastly, the funds were net sellers of 3,000 SRW wheat contracts on the week.

Iran and Oil

SPEAKER_01 12:21

Still got some pretty solid length across the grain complex here. This is corn plus soybeans plus SRW wheat funds still net long 361,000 contracts. That's uh a far cry from the 626,000 that they were long at the at the record in 2012. But this is a pretty aggressive net long position. Um, premium subs. You guys have the full versions of the fund tracker charts and also the daily fund tracker in your email this morning. The most aggressive fund position here is in soybeans. That's that's historically like relative to historical norms. That's your your most extreme net long corn is like, yeah, they're net long, but they're not super aggressive yet. And not really much of an opinion in SRW wheat. I believe the funds are along HRW wheat, which is um, you know, the stuff associated with the uh drought in the southern plains.

SPEAKER_00 13:07

Over the weekend, President Trump called off U.S. Iran negotiations that were scheduled to take place in Pakistan. He said the talks involved excessive travel and cost relative to what he described as an insufficient proposal from the Iranian delegation. While the ceasefire, which was extended last week, has paused full-scale fighting. There is still no clear path to ending the conflict. Iran has stated that it will not negotiate under pressure and is demanding the U.S. lift its blockade of the Strait of Hormoes before talks can begin. However, it appears that the US is planning to continue with that blockade.

SPEAKER_01 13:42

I've decided to personally kind of just ignore the rhetoric because it's just, it's it's just a on a cycle of repeat. So you just got to look at the markets. What's the market telling you? Okay, crude oil is at toward the upper end of the recent range, but at 96 bucks here in your June WTI, you're you're within the range that we've been trading for weeks now. So the market is kind of undecided on all of this. Um, the stock market's still acting well, like maybe this is gonna end sometime soon. I'm also interested in fertilizer prices and that sort of thing. But in terms of the back and forth, like exhausting commentary from both sides, I just I don't know if I can do it anymore. Uh, what did cattle do on Friday?

SPEAKER_00 14:19

Cattle futures were higher. Live cattle were a buck 22 to but to a buck eighty higher. Feeder saw gains ranging from a dollar up to 397. Cash cattle trade was light last week in both the southern and northern plains. Cattle were two dollars lower compared to the prior week at 246.

SPEAKER_01 14:34

Stock market is mixed this morning, pretty quiet. Treasury's off just a little bit. Crude oil is up a dollar twenty two in the June WTI 95.62 S trade. Have a great day, guys. We'll be back Tuesday.