USA Today
08-16-07
Absentee owners lease their farmland
By Haya El Nasser, USA TODAY
Lucy Millman had such fond childhood memories of summers on grandma's farm
that she chose to get married there. So when her mother gave her a share of the
300-acre family farm, its Victorian house and historic barn, Millman became a
farmer.
She didn't give up her administrative job at Northwestern University in Evanston,
Ill., and trade in her business suit for overalls. Instead, she stayed put and
became one of a growing number of city folks who are long-distance farmers.
Because of changing demographics and rising farmland values, more farms are
ending up in the hands of urbanites who have never worked the fields and
probably never will. These owners hire management companies to lease the land
to farmers and collect the rent or share of the crop.
For widows and children who inherit farmland, keeping it can make more
financial sense than selling it. They don't have to pay capital gains taxes and can
expect an annual income. Many, such as Millman, hang on to it largely because
they have a sentimental attachment to land that's been in the family for more
than a century.
For a growing number of investors, cornfields have turned into gold mines
because of the surge of interest in ethanol.
In the past five years, farmland values appreciated from 10% to 15% a year
compared with about 6% annually in the past 30 years, says Jim Farrell,
president and CEO of Farmers National Company, the nation's largest farm
management business, based in Omaha.
"That's really a hot piece right now," says Lynn Henderson, publisher of
AgriMarketing, a St. Louis-based magazine that covers the business of
agriculture.
As the stock market weakened and gas prices soared, more investors put their
money in farms that produce crops that can be converted to fuel.
"This ethanol situation has really turned a lot of things on its ear," says Michael
Duffy, professor of agricultural economics at Iowa State University.
Frederick Gillis III is a financial adviser in Boston. About four years ago, he
considered investing in rental housing in the city but "we decided we didn't want
to be landlords with three tenants."
His wife, who grew up in Nebraska, suggested buying a farm. He did his
research and bought 160 acres at about $1,200 an acre in Chase County, Neb.
"Even before corn prices went skyrocketing, I had a great return," says Gillis, 40.
He and his wife now own a 260-acre sugar beet farm in Sedgwick County, Colo.,
and 30,000 pigs in Iowa and Nebraska.
He figures that their 15-year mortgages will be paid off by the time the oldest of
their three children goes to college. The income from the land will pay their
tuition.
Gillis visits the farms at least twice a year.
Still, most long-distance farmers have a more intimate connection to the land.
"For the most part, it's people who grew up on the farm," Farrell says. "A lot of
farmers don't have any heirs who want to farm. The number of full-time operating
farmers continues to go down and land gets spread out into more hands of nonoperating owners."
Almost half of all farmland is owned by people who don't farm the land
themselves, according to U.S. Agriculture Department data. About 70% of the
farmland in Illinois, for example, is farmed by someone other than the owner,
Henderson says.
"Perhaps they moved to town when they retired or they moved off the farm and
took a job in town and inherited the farm," Farrell says. His company manages
3,600 farms for 4,000 landowners.
Aging is the driving force behind this growing trend, Duffy says.
In Iowa, more than a fourth of the farmland is owned by people over the age of
75, he says. In 1982, about 6% of the state's farmland was owned by people who
didn't live in Iowa. As the population aged, the share jumped to 20% by 2002 and
"it's going to continue to increase," Duffy says.
Millman's farm has been in her family since 1860. It is now incorporated and has
13 shareholders. They hired Farmers National to lease the land to a farmer.
"This has been a self-sustaining farm and none of the shareholders had to put
any money into it," she says. "We use most of the money to keep up the house
and it's mostly a gathering place for all the family."
The family held a memorial service there for an aunt who died recently. And
Millman says her 20-year-old son visits the farm often.
"Our job as shareholders is to continue the farming way of life, to show our
children and to expose them to the farming way of life," Millman says.