How COVID-19 has affected farmland and farming
Reprinted from an article I wrote in Prairie Farmer in December 2020.
Professional farm managers and appraisers have always enjoyed a unique view of agricultural production. We work with a lot of farmers and landowners, and that gives us a broader perspective of how COVID-19 has impacted farming.
In short, it’s been far reaching, impacting the businesses and lives of nearly everyone. People changed how they spend their time and their money on a global scale. Some changes may be temporary, but others may persist.
Some of the first stories early in the crisis were of farmers dumping milk or leaving crops in the fields to rot as food destined for restaurants and schools was no longer needed or could not be processed due to infection-related shutdowns. Many here at home and in nations abroad experienced shocks to their food security. We anticipate demand for food to increase in the near term as it is stockpiled and more locally sourced.
Manufactured goods continue to be affected, with reports of equipment parts being delayed.
Demand for locally sourced food because of supply disruptions and growing local rural populations will continue to increase. Agritourism is also expected to flourish after the pandemic. Opportunities to fill these niches by entrepreneurial farmers will continue to grow.
To the farm?
Remote work had started to gain traction before COVID-19. Once the pandemic hit, many companies realized that work can be done nearly as efficiently at home as in the office. Looking to reduce costs, companies are more likely to allow people to work from home. More people are expected to move away from urban centers, creating strong demand for smaller tracts in rural areas. We see land values for smaller agricultural and recreational tracts increasing as people look to build and experience rural living.
Ad hoc subsidies have been a lifeline of support for many farmers dealing with the recent trade wars, and the Coronavirus Food Assistance Program and CFAP 2 have helped keep farms afloat. The influx of money, increased commodity prices and historically low interest rates have all helped to support the land market. A lot of farmers and investors want to purchase farmland.
Some would argue that COVID-19 also may have played a part in the change in administration in Washington. Uncertainty about the future of 1031 exchanges and tax laws is already prompting more landowners to investigate selling.
We expect the agricultural land market to be vibrant the last quarter of 2020.
Despite the restrictions on gatherings that make in-person auctions challenging, brokers are working to overcome the challenges: Think livestream videos and online apps for mobile bidding. They’re also taking the auction outside. It’s not unusual to see bidders in their trucks, listening to the auction broadcast from an FM transmitter.
We’re also seeing financing delays, thanks to COVID-19. Appraisals became difficult when government offices shut down last spring, restricting access to appraisal information. That created a backlog that will take time to work through as offices reopen.
Despite COVID-19 hardships, we see opportunities in agriculture. Farmers are resilient. Responding to hardship is something they are used to. The pandemic is new and COVID-19 is new, but challenges for farmers are not. They know they don’t have to like it; they just have to deal with it. The good news is that they are still here, and they're still farming.