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Patrick Springer, Published November 20 2013

Economist touts farmland as a solid investment during Great Plains Land Expo

FARGO – A real estate economist believes farmland is not at risk of becoming a “bubble” and will continue to be a solid investment.

Mark Dotzour, chief economist and director of research at the Real Estate Center at Texas A&M University, delivered that prediction Wednesday as the keynote speaker at the Great Plains Land Expo.

Investors have flocked to agricultural land and other investments, including gold and apartments, as a hedge against the worry of a future plagued by hyperinflation, which Dotzour does not believe is on the horizon.

“I personally am not worried about inflation at all,” he said, noting that job growth is anemic and the velocity of money as it moves through the economy is slow. “I’m more worried about deflation.”

Productive farmland is a tangible asset, capable of providing a return from crops, and Dotzour believes it is a better investment than other options.

“Where’s the alternative?” he asked, more than once. “There’s nothing better than land.”

As a result, he does not foresee a “big movement out of cropland” but also is not predicting that prices will continue to rise, although he quipped, “As long as there’s fraud on Wall Street, land prices are going to keep going.”

Alternatives to farmland, including apartments and gold, are highly priced, and therefore not attractive as investments, in Dotzour’s view.

“All of those investments are at record high prices,” he said.

Foreign investors, including the Chinese government, have turned to commercial real estate in the United States.

“On a global basis, we’re still the prettiest pig in the trough,” said Dotzour, who said he has 80 percent of his own investment portfolio in commercial real estate at age 59.

In his talk, peppered with humor, Dotzour scanned the economic horizon. Among the highlights:

- Although job growth and economic growth in the U.S. will remain sluggish, the economy is strong by important measures, including net worth now at record levels. “This is why I’m bullish,” he said.

- Consumer spending is rising, with brisk sales in vehicles and light trucks, partly from pent-up demand. “This is a real economic recovery,” Dotzour said.

- Household debt payments as a percentage of disposable personal income is down significantly, to the low end of normal. “We’ve got money to spend again,” he said.

Land prices in the past year have risen 18 percent in Indiana, 17 percent in Michigan and Illinois, 14 percent in Wisconsin and 41.5 percent in North Dakota, according to Dotzour’s figures.

“People know prices are high but they’re still buying,” he said.

In an interview, Kevin Pifer, president of Pifer’s Auction & Realty, said farmland sales have remained high in North Dakota and Minnesota, but prices peaked last year.

“Since then, farm prices have generally moved laterally,” Pifer said, adding that cropland has been selling for $2,000 to $7,400 an acre, with pastureland selling for about $450 to $1,500 an acre.

Land in the Red River Valley has been selling for around $4,000 to $6,200 an acre, Pifer said. His firm sold 49,000 farm acres last year at this time, and 51,000 acres so far this year.

The Great Plains Land Expo, the second, was sponsored by Pifer’s and The Forum.

Readers can reach Forum reporter

Patrick Springer at (701) 241-5522