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15 Must-Ask Questions Before Buying Farmland
American Bankers Association The increase in crop and livestock prices have generated significant profits for many farmers, which some are using to buy additional land. Growing demand has driven land values to record highs in many areas. Whether farmers are using cash or borrowing money, buying land should include a well-researched financial plan. “Farmers should consult their banker throughout the land buying process, to ensure decisions made today best position them to prosper and obtain credit in the future,” said John Blanchfield, senior vice president of agricultural and rural banking at ABA. “When it comes to buying land, you cannot spend too much time researching all of the contingencies.” Given current market conditions, ABA’s Agricultural and Rural Bankers Committee, made up of leading agricultural bankers in the country, has developed the following recommendations for buying farmland: 1. What is your business’s financial condition? Consider needed investments, expected expenditures, and crop conditions to determine if buying land is the best use for your cash. Are there other opportunities that can provide a better return? 2. Have you created a pro-forma cash flow? Research sales trends and expected revenue of a potential plot of land to determine how well the purchase fits within your plan. Does the potential return meet your objectives? Your banker can help you develop this essential planning tool. 3. Given your revenue forecast, are you overpaying? If you are paying a premium, how long will it take you to recoup? Determine how much your business should prudently spend on a land purchase and the revenue needed to justify your purchase and stay within those targets. 4. Have you thought long and hard about it? Never be rushed by a broker and never confide your best price or financial goals with a party working for the seller. Don’t buy impulsively or make a deal before visiting the property numerous times. Rework the standard broker’s purchase contract with your lawyer, deleting what you don’t like and adding what you want, before presenting the offer. 5. Does it make more financial sense to rent the land rather than owning it? Rental rates are high, but renting frees your cash for other activities. What will be your total land payment per tillable acre owned and how does this compare to cash rents in your area? Whether using cash or borrowing money, buying farmland should include a well-researched financial plan. All in with cash? Water source? 6. Should you go all in with your cash? Talk to your banker about alternatives to using all cash in the transaction. Land is an illiquid asset and purchasing it will impact your farm’s liquidity. Your banker can work with you to structure a loan that will enable you to acquire the land you need while preserving some of your working capital for necessary expenditures. 7. How much land are you acquiring? Sounds simple, but many times there is confusion about how much land is actually being purchased. Know exactly what you’re getting before making a bid. See if the land has been surveyed and make sure it matches the details of the offer. If the land has not been surveyed, work with your attorney to determine the acreage based on the legal description or consider having the land surveyed and determine who will pay for it. Make sure that there are no special easements tied to the land. If there are, make sure you spend time studying them and understanding them completely. 8. What does the land appraise for? Are there some comparable sales in the area? Appraisals are expensive, but they are the best way to establish value. Even if you do not get a full appraisal, attempt to find some comparable sales to determine if the purchase price is reasonable. 9. What is the soils story? What is the capability of the soil you are buying and how does this impact your revenue forecast? Good soil is paramount. Know the type of soil you’re buying and the history of annual crop rotation. Any seller should be more than happy to provide you with a soil’s profile and information about past farming practices. 10. What is the water source? Is the property irrigated? Do the water rights convey with the property? Adequate water is essential to establishing the value of the property. Account for water cost in your financial plan to ensure this cost doesn’t negatively impact your return. Make sure all water wells are registered with the appropriate authorities. Each state has its own water laws so make sure you are familiar with the state that you are doing business in. 11. What do you know about the gas, mineral, and wind rights for the property? Do these rights convey to you as the purchaser? Have they been surveyed or severed from the surface rights? Are they currently under lease? If so, under what terms? Have a thorough knowledge of property rights, as mining and drilling can have an impact on surface and water quality, access to the property, and the viability of the farm or ranch. Zones and deeds 12. How is the property zoned? Will your plans for the property conflict with existing zoning restrictions? Are there conservation easements that could restrict use of the property? This factor has a significant impact on your valuation of the property, particularly if your plans conflict with current zoning restrictions. Make sure that you understand the assured leases that may go with the property — many of the states in the west have a large percentage of their ground that falls into this category (bureau of land management, forest service, state land, national grass land). 13. How will you hold deed in the property? Will you own it individually, jointly with a spouse, in a family owned entity (corp., LLC, LLP) or in a trust? The pros and cons of how you own the land will depend on your long term goals. 14. Are there any environmental problems? The last thing you want to buy is a costly environmental problem. Paying for an onsite environmental audit before you buy the land may be worth the cost and will help ensure you are not buying into an expensive cleanup. 15. How long will you actively farm? Make sure your financing plan matches the rest of your intended career as an active producer. Will you fully retire all debt from the acquisition before you retire? Do you have sufficient life and disability insurance? No one knows more about financial budgeting and cash flow planning than your banker. ABA recommends making an appointment to talk with your banker about the significance of purchasing land and how it will impact your business. Continue reading
Missouri Moves To Lift Ban On Foreign Farm Owners
Alan Scher Zagier, AP 4:47 p.m. EDT June 18, 2013 (Photo: Amanda Lucier, AP) JEFFERSON CITY, Mo. (AP) — Weeks before a Chinese conglomerate agreed to buy Smithfield Foods in the largest such takeover of a U.S. business, Missouri lawmakers quietly approved legislation removing a ban on foreign ownership of agricultural land. Missouri is one of several Midwest states with little-known laws passed in the 1970s amid concerns over Japanese investment that prohibit or restrict foreign farmland ownership. The company has operations in 26 U.S. states, including several in the Midwest. Smithfield has said it doesn’t believe these issues will be an obstacle to the takeover deal being approved. Meanwhile, Smithfield announced Tuesday it is laying off 120 more workers as part of its previously announced closure of a Virginia facility that makes hot dogs and deli meat. The Smithfield, Va.-based pork producer plans to close its Portsmouth, Va., plant in the middle of August, said Jeff Gough, Smithfield’s senior vice president for human resources. A northern Missouri legislator whose amendments to a pair of larger bills helped push the plan through the state legislature and onto the desk of Gov. Jay Nixon said he wants to provide greater oversight of foreign ownership, which will be capped in Missouri at 1% and require state approval. The changes were approved on the final day of the legislative session. “The law doesn’t work,” said Rep. Casey Guernsey, R-Bethany, citing legal loopholes that allow foreign owners to mask their assets behind domestic-based groups. “What I want to do is make it work … It will provide a degree of accountability for an international corporation that it wouldn’t have before.” Shuanghui International Holdings announced its plans to purchase Smithfield Foods on May 29 in a deal that still requires shareholder approval and a federal regulatory review by the U.S. Committee on Foreign Investment. The deal’s expected value is $7.1 billion, including debt. In Oklahoma, the law limiting foreign farmland ownership exempts swine operations, said Diane Clay, an Attorney General’s Office spokeswoman. And in Iowa, the office of Attorney General Tom Miller said it expects Smithfield Foods’ new owner to “comply with all (laws and) agreements,” including a consent decree related to livestock production by meatpackers. “We hope to close the loop soon, whether it’s a final letter from Smithfield to us or a memo of understanding from our office to Smithfield,” said Geoff Greenwood, a Mille spokesman. The Missouri bill awaits Nixon’s approval, and his office declined to say whether he would sign it. The offices of Attorney General Chris Koster and the state Department of Agriculture also declined to comment. A Columbia-based group that opposes the corporate consolidation of the agriculture industry criticized Guernsey’s handling of the legislation. Language removing the foreign ban was added to two Senate bills in late April while in the House Agribusiness Committee, which is chaired by Guernsey. The underlying bills to which the amendments were added deal with farm loans and University of Missouri Extension districts. In early May, Guernsey added an amendment while the bill was on the House floor that doubled the allowable foreign farmland ownership from half a percent to 1%. “To call it a coincidence is doing a disservice to the democratic process,” said Tim Gibbons of the Missouri Rural Crisis Center, referring to the legislative votes that preceded the Smithfield sale announcement and the absence of broader debate. “These things should have been discussed. And they weren’t.” Guernsey, a dairy and beef cattle farmer, countered that he introduced a similar bill in May 2012. He bristled at suggestions that the foreign ownership ban was lifted at the request of Smithfield, which he said is the largest employer in his five-county district and a campaign contributor of Guernsey’s. “I didn’t even know about Smithfield until we were out of session,” he said. “Trust me, the last person Smithfield tells about any of their business decisions is Casey Guernsey.” While Guernsey said he “can’t stand the thought of the Chinese owning our largest employer,” he’s eager to see the potential economic benefits of a deal that some observers believe was driven by greater demand among Chinese consumers for U.S.-produced food. U.S. Sen. Roy Blunt shared a similar sentiment. “That’s a great opportunity for U.S. agriculture and a great opportunity for American agriculture,” he said. “Once people get better food they universally do not want to go back to the bad food again. Not only is there going to be more people but there’s going to be more demand and more competition for the food that’s out there. ” Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed Continue reading
Capturing the plight of Syria’s refugees
Capturing the plight of Syria’s refugees Sarah Young / 23 June 2013 From an elderly woman forced to watch the murder of her husband, to the young man who suddenly finds himself a father of three — a new photography exhibition opening in Dubai this week hopes to open people’s eyes to the heartbreaking effects of civil war on the Syrian people. Victims of War, an exhibition featuring the work of Hermoine Macura, a Dubai-based Australian journalist who has worked in the Middle East for 12 years, will be on display at Pro Art Gallery from June 25. Macura said the non-political and non-governmental project, with its focus on highlighting humanitarian crises and suffering in Syria, was the hardest and most heart-breaking work she had done in the Middle East. The photos were taken in late December last year and early January, mainly at the Zaatari refugee camp in Jordan, near the town of Masraq about 30 to 50 kilometres from Syria, where thousands of refugees were arriving daily, she said. “Children with special needs, people in wheelchairs, people having to be carried over the border, elderly…like a swarm through the sandstorms…imagine a sandstorm in Dubai times ten. You could barely see. “Some women were giving birth on the border with no medical care.” But what troubled her the most were the sexual and gender-based crimes against women. “Some women were tortured and raped with animals and rodents. Girls as young as 10, 11, 12 raped, tortured and mutilated. I have never seen such extreme cases of torture like this in the Middle East, even when I was in Iraq. Humanitarian organisations had to bring in psychologists and counsellors to deal with the trauma, she said. “The cultural shame and embarrassment attracted to (rape) made it very difficult for people to seek medical treatment…many were suffering in silence. “As an outsider it was just shocking. We don’t get to see how people really suffer. We get desensitised, and there’s nothing focused on highlighting this. It took a long time to digest what she had seen. “Every single person stays in my eyes, heart and mind. “When you see things like this, it makes you more sensitive to choosing diplomatic solutions over war…everyone is so quick to take that option (of war), especially when you live in priviledged societies where you’re safe and secure, but they don’t realise the consequences, the damage on generations of people and how it affects society as a whole. While those living in the UAE were blessed, people living in other parts of the Arab world were not. “I really don’t know what will happen to them. If you look at Iraq before the Gulf War, it was a very rich country, and if you go there now the Iraqi people are in poverty. A lot of women are turning to prostitution.” Eighty per cent of the refugees she saw were women and children. “In any situation of lawlessness, the women and children are going to suffer the most. “When you break the woman you break the society. She’s raising the children, holding everyone and the community together.” While she saw very few men, she could vividly recall one who had adopted the children of his two brothers who had been killed, and taken them across the border. “This was a single, unmarried man who was now a father of three children at 25 years old. He took these kids across the border and is now in a camp trying to plan or work out how do you move on from this.” Another face which stuck with her was that of a woman in her 80s. “Gangs came to her house. They killed her husband and burnt her house to the ground in front of her. She has nothing. She came across that border by herself. It was unusual to see elderly people being attacked in the Middle East, she said. “People work their whole lives for their home. Now she’s got nothing. She said ‘I can’t stay here because this is not my country. But there’s nothing for me at home either. I don’t know what to do’. “My camera man had to stop shooting because he was crying. It was so, so sad.” The two images that stuck with her the most, though, were of children. The first is of three disabled boys, standing in a desert storm trying to close their jackets with what was left of their arms. “They were like scarecrows on the rocks. To see young lives just blowing or withering in the wind…it was very disturbing. “This was the first project where I got to see how children and people with special needs suffered…there were not enough wheelchairs, kids had to sit on the floor or in a makeshift box with wheels.” The other image was of a little girl, about nine, outside a medical facility waiting for treatment. “It was the determination in her face…I felt that was a ray of hope. I could feel the spirit of the Syrian people in that young girl…who had come by herself, and was still holding it together. I just hope when people see these images they can see the humanitarian crisis, (but also) the people — that there is hope too, not just suffering.” The UN’s refugee agency UNHCR, medical staff, and volunteer camp workers, were doing an “amazing job”. “(UNHCR have) poured $1 million into refugee camps in Lebanon, Jordan and Turkey. “Compared to what the Palestinians had to endure in the camps in Lebanon, this is really good. The shelters and tents are like little villages, housing more than 100,000 people. She said she was impressed with the high donations being made by Saudi Arabia and the UAE, even though the countries did not shout about it. Expert doctors also flew in every ten days from the Gulf states and some children were flown to GCC countries for specialised surgery, she said. “So in that darkness, there was some hope that came to light…some kids were born with a club foot but were so poor, or lived in such remote parts, they had never been able to be treated. And now they could be.” According to the UNHCR website, more than 1.6 million Syrian refugees are being hosted in foreign countries, with the majority in Lebanon and Jordan — and more than one million of those arrived in the first five months of 2013 alone. Women and children make up three-quarters of the refugee population. If current trends persisted, it could be expected that more than three million Syrians would have left their country by the end of this year, the website said. The exhibition will be going to Qatar and New York with all profits being donated to humanitarian organisations such as UNHCR. It opens at 7pm on June 25 and runs until July 15, at Pro Art Gallery in the Palm Strip Shopping Mall on Jumeirah Beach Road, Jumeirah 1. See www.victimsofwar.ae . sarah@khaleejtimes.com Continue reading
