Conservation practices boost farmland value

HENRY, Ill. — When investors interested in purchasing Midwest farmland talk to Kyle Maple at US Agriculture LLC, there’s a new addition to their wish list — conservation practices.

“Our most recent client is a group that has a goal of getting those same farmland returns, but also adding, how do we improve the farmland from an ecological and environmental standpoint?” he said.

Maple is the Midwest regional director for US Agriculture, an Indiana-based farmland investment advisory firm that builds farmland portfolios for institutional clients. Those clients include pension funds, insurance companies and similar groups.

Conservation and implementation of conservation farming practices has moved up the list of demands of clients, Maple said.

He was a guest speaker at a field day at McCuskey Farms in rural Marshall County to debut the farm’s Smart Wetland.

Because their client base is open-ended funds, meaning that the client does not have a termination date in mind, the client intends to own the land for a long period of time.

With long-term ownership in mind, conservation farming practices, such as the recently installed Smart Wetland at the McCuskey Farms, have become a priority.

“They might want to own the farmland in perpetuity. That is why projects like this are interesting to groups like ours,” Maple said. “They look at it and say, how are you going to maximize the value and the return on our investment over the long term?

“When you are looking at ownership indefinitely and you are trying to prevent risk, risk of nutrient runoff and what implications that might have, that is pretty important to an investor. That is pretty important to all landowners.”

Like farmers who implement conservation farming practices, clients that prioritize those practices when looking for farmland as an investment understand that returns will be long term.

“If it was a 10-year, five-year investment-type timeline, this doesn’t make much sense to them,” Maple said.

He said that to answer the question of how farmland’s value can be improved by conservation practices, and which practices offer the best return, his firm considers several factors.

“We manage that through key performance indicators. We are tracking how much organic matter is in the soil,” he said.

“Are we able to reduce chemical and fertilizer use through time? Are we able to build biodiverse acres on the property and build organic matter in the soil?”

Those performance indicators reflect the understanding that implementing those practices and seeing results will take time.

“Again, long-term investing, long-term ownership of farmland. Those aren’t things you fix in a two- or three- or four-year period. Those are 20- and 30-year goals,” Maple said.

He said the clients US Agriculture serves look at farmland investment in the same way that farmers themselves do.

“They got into farmland investing for the same reasons a lot of you own farmland or have appreciated the farmland investment you have. It’s been a great diversification for equity investments,” he said.

“It’s been a great store capital. It’s been a wonderful inflation hedge. Those types of things are what attract capital to farmland.”

Maple said conservation practices offer another return on investment for farmers.

“If you are a farmer and you are able to implement practices like that, you have a free marketing strategy all of a sudden,” he said.

“You can go out and tell people, ‘This is what we do on the right farm.’ You’re not doing it when it’s just willy-nilly. You are doing this when it makes sense on the piece of property you are operating.”

In addition to preventing nutrient runoff, conservation practices add value by preventing something else — negative headlines.

Maple pointed to the 2019 lawsuit filed in Iowa by citizen and environmental groups against the Iowa Department of Agriculture and Land Stewardship, the Iowa Department of Natural Resources and several other state entities.

The lawsuit claimed that the state’s voluntary nutrient loss reduction plan failed to protect and improve water quality in the Raccoon River. The lawsuit was dismissed in 2021 by the Iowa Supreme Court, but the dismissal was a close 4-3 vote.

“That is a pretty telling number. That is Iowa. That economy is the No. 1 state where the ag industry has the greatest effect on their economy, so 4-3 is a pretty close vote,” Maple said.

He said that demonstrable conservation practices on farms can mitigate the risk of negative PR.

“As we look at other states, how are we managing risk from making sure we are not getting headlines? It is a factor in our decisions when we make farmland investments,” he said.