In stocks its often said, "buy the rumor and sell the news", essentially the time to buy is when the word hasn't spread yet because by the time it hits the news you've lost the advantage. Maybe we're beginning to see that with Farmland? Now that professional athletes have started to dip there hand in growing corn America's greatest asset is about to be fully realized.
Recently a news piece has been spreading on the internet about a collective group of professional athletes, including Blake Griffin and Joe Burrow, pooling around $5 million in funds to purchase farm land. It looks like their first land purchase was 104 acres in Iowa on a farm that produces Corn and Soybeans. While this Bleacher Report article incorrectly states they paid $5 million dollars, it does beg the question how much did they pay and what type of return are they getting?
Below I have linked 2 articles that estimates the rate of return for an Iowa farm. The first article looks at corn in IDA County, Iowa while the second looks at Soybeans in Sioux County, Iowa. It goes into detail how one derives the price per acre and expected cash rent by county and gives you a range of potential outcomes.
Summary:
Really the summary is quite short, there isn't too many ways they could have made a return over 5% unless they are charging exceptionally high cash rent. The only option highlighted is buying at around lowest cost per acre and charging the highest amount bringing maybe 5% return. However this doesn't factor in the management cost because the professional athletes aren't going to maintain these relationships, they can't talk to the farmers. Maybe they got a 5% return, or maybe they got a 2% return and are happy just to be diversified.
