Farmland Partners, unveiling a fall into the red fuelled by
costs from a land-buying spree, forecast land rents holding steady despite
the drop in crop prices – a recipe academics warned will lead to farm losses.
Paul Pittman, the founder and chief executive of Farmland
Partners, which buys land for leasing out to farmers, acknowledged the drop in
prices of crops, with corn futures standing near four-year lows in Chicago, on
a front contract basis.
However, "the farm economy remains very strong due to high
productivity and the general strength of farmers' balance sheets coming off of
several very profitable years," he said.
"We believe that values and rents for high quality farmers,
like the ones in our portfolio, will hold stable, if not moderately increase."
The forecast tallies with
a report from the University of Illinois out overnight which said that land
rents in the state, having risen in 2012 and 2013,"likely will increase in
However, with crop prices lower, rising land charge would
push farmers further into the red, foreseeing losses of $46-81 per acre for
Illinois corn growers, also facing higher costs than historically for the likes
of pesticides, seed and machinery.
Cash rents in Illinois look like returning to levels equivalent
to well above 30%, as a proportion of corn revenues, in line with that from
2000-2005, but which "will result in farmer losses due to higher non-land costs
from early-2000s levels," University of Illinois farm economist Gary Schnitkey
"The negative returns point to the need for adjustment
downward in costs, including cash rents."
Farmland Partners issued its forecast as it unveiled a loss
of $541,668 for the April-to-June quarter, compared with earnings of $496,946 a
While revenues rose 24% to $700,965, reflecting the increase
in the group's land portfolio, which exceeds 25,000 acres, including two unfinished
Arkansas deals, its costs soared, swollen by its acquisition drive, and
relating to being since April 11 a listed company.
Total costs soared to $1.04m, from $67,385 the year before,
with acquisition and due diligence costs jumping from negligible levels to more
than $60,000, and general expenses rocketing from less than $8,000 to nearly
'Very important quarter'
Mr Pittman added that "this was a very important quarter
for Farmland Partners.
"We entered the public stock market, and we deployed capital
raised in the offering quickly and efficiently."
The group two weeks ago, through a share sale, raised a
further $46m which it said would enable continued expansion into fresh areas of
the US, and diversifying its portfolio.