Ranch owners come in a number of categories: those who would just like the open space setting, others who want a mostly passive investment perhaps with recreation potential and the truly hands-on rancher in it for the long haul.
For those with their hands off day-to-day operation the phrase “All hat and no cows,” might fit.
For those with their hands off day-to-day operation the phrase “All hat and no cows,” might fit.
Some 10 years ago I recieved a call from a woman in Florida saying she and her husband were considering a move to Central Oregon. She added with apparent skepticism, “my husband thinks he’d like to grow some hay.”
Neither of the couple had any family background or experience in ranching. They wanted a place with elbow room and a good site to build a home, which they realized by buying in a gated estate property with irrigated hay fields and a vineyard run through the homeowners association. In effect, it’s a taste of ranch life without the work.
The neighboring property to their gated environment is a working hay and livestock ranch owned by the founder and chairman of a well-known international athletic equipment and apparel company.
Several years ago I listed a 550-acre ranch far from the nearest grocery or retail stores. A buyer put much of his retirement plan into the acquisition, which included irrigated hay fields, livestock and a nice view home. A few years later he sold out after raising cattle for Kobe beef and returned to a more urban setting.
Recently I had another call from a hedge fund manager looking for investment ranch land--no value in a home, horse facilities or livestock, just irrigated land in crop production. He has never been a rancher but wants the potential benefits of productive land with a tax-friendly conservation easement potential.
A farm and ranch price boom in some areas of country
Some of the current interest in ranch properties stems from a reported national rise in agricultural crop land prices. But the runup in farm and ranch land prices is giving rise to warnings from some quarters that prices may not be sustainable, and even concern of a possible boom to bust scenario.
In late 2012 the Los Angeles Times reported Prudential Financial Inc., subsidiary of the insurance company, had acquired crop land with avocados, lemons, mandarin oranges and almonds in California.
In California the average cost of farmland rose to $7,200 an acre in 2012 with properties in almond-growing areas ranging into the $15,000 to $19,000 according to the Times report.
The demand for farmland has spawned a number of independent investment and hedge funds including Agriworld Fund Inc. and Famland LP in addition to funds such as Prudential’s.
A recent report in the American industry publication noted farm land in the midwest “corn belt” and the high plains appreciated from 15% to 26% in 2012 according to Federal Reserve studies. Some of the demand is being driven internally by existing farm & ranch owners who are less comfortable with stocks when allocating investment capital and also weary of low returns on cash equivalents and bonds.
An April report by the Kansas City Federal Reserve Bank raised concerns that some farmers are using inflated land sale values as collateral to take on debt that may drag them down in a demand slump. Commodity prices have reached all-time highs and are due for significant drops, according to various reports.
No frenzy in Central Oregon ag land market
Also part of the downside equation is expansion of competing world-wide agricultural production and drought conditions in much of the country’s most productive regions.
Although sales of farm and ranch property are picking up in Central Oregon there is an absence of frenzy such as reported in other areas of the country--and likely the less chance of a major bust.
The region does not have the highly-productive food crop land found in areas of the midwest. Most land is in hay production with other crops such as mint, garlic, wheat and chickpeas to name a few. Most of the larger ranches for cattle grazing lie farther east toward Burns and beyond to the Idaho border.
Most of the properties included a residence, farm buildings and irrigation or other equipment, making it difficult to separate the price for productive acreage from the total assets sold.
Throughout Central Oregon in the period from January 1, 2012 through May 19 of 2013 there were a total of 30 sales of farm and ranch properties listed on the regional multiple listing service at a median price of about $3,849 per acre. The median for land with no value assigned to a home was $3,499 and the average was $3,780. Total sales volume for the period was $27,185,850.
