Reprinted with permission from an article I wrote for Prairie Farmer in January 2021
“It’s tough to make predictions, especially about the future.” — Yogi Berra
The internet can be a wonderful tool. Never in human history has the sum of all knowledge been available at one’s fingertips like it is today. Unfortunately, in some cases, questions that are now easily answered by Google — saving countless hours arguing over trivial knowledge with the Cliff Clavins of the world — have been replaced by cat videos. Knowledge is only as good as the purpose for which it is used.
Galileo improved the design of the telescope and gave it to the leaders of Venice so they could observe ships coming in before their competition to make more money. Clearly, Galileo understood that gaining better knowledge or transparency of what is happening in the marketplace provided value. He was right.
Today, we see it happening in farmland, as well. New internet companies such as CashRent, Tillable, FarmlandFinder and AcreValue add transparency to the agricultural lease and property markets. They promise to add value for landowners, much like the telescope did for the merchants of Venice.
But what does that mean for the farm management world? Does it spell the end for farm managers?
Much like how Zillow has empowered businesses like for sale by owners, companies like CashRent and Tillable fill a niche for landowners who want to take an active hand in leasing their farm property. They provide a more efficient means to bring landowners and farmers together to lease property. In the past, finding information about who farms in the neighborhood without living in the neighborhood could be difficult. Conversely, it was nearly impossible for farmers to know which landowners may be considering changing tenants. These companies do a particularly good job bringing the two together.
These companies also facilitate record collection and lease payment from the tenant to the landowner. That’s a benefit to landowners who are knowledgeable of what information is needed to preserve the value of their farm.
However, tenant selection, lease negotiation, tenant reporting and lease collection are only a small part of land management — and that’s where professional farm managers come in. They help guide and represent landowners. They’ve managed many properties and encountered many different farm production situations, and that experience gives them unique perspectives that can be a valuable resource for farmers. They can also help landowners fulfill goals, enhance annual income and preserve the value of the investment.
I liken it to the residential home market. Even though Zillow has provided more transparency, some folks will always need the expertise and local knowledge of a real estate broker. It’s the same with farm managers: The total value of a professional farm manager can’t be replaced by a website.
And the appraisal business?
Companies like FarmlandFinder aggregate information about properties that are currently for sale on the market. That helps landowners get a general feel for what their property may be worth. Companies like AcreValue take it a step further; they aggregate incredible amounts of information about soils, climate, crop rotations, taxes, interest rates and corn prices to calculate the estimated value of an individual field. The more information they have improves the algorithm, and the result.
But valuation algorithms are only as good as the information that is fed into them. If you put incomplete information in, you get incomplete information out. While farms are broadly similar within a given area, they will always contain unique characteristics that affect value. The more unique a property is, the less likely a broad algorithmic approach will work.
A rural appraiser can recognize and dig into the characteristics of each property, analyze them and compare them to the market. Or in other words, appraisers have the ability to reason — something an algorithm is not currently able to do.
So, while companies like FarmlandFinder and AcreValue are good sources for general information about farmland value, you still need a human touch to get an accurate value for your farm.