Sustainable agriculture--How to Make Sustainable Land Investments

January 11, 2024

Sustainable farming and making the wise investment decisions

Sustainable Agriculture—How to Achieve Sustainable Land Investments


Article by Gary Hubbell, ALC

Broker/Owner/Auctioneer, Accredited Land Consultant

United Country Colorado Brokers, Inc.


Environmental Sustainability is the #1 Goal Among Corporations


A few years ago, my wife and I sat in the audience as our son graduated from college with a business degree specializing in Professional Land and Resource Management, which is a program geared towards the oil & gas industry to develop new sources of energy. It was actually a great degree program for a young man entering into the world of ranch real estate brokerage, with classes in water law, geology, business marketing, and ranch management, among others. But there were only a few graduates from that program, and they were outnumbered at least 5:1 by young people who had earned Environmental Science degrees. I just read a recent study talking about how many corporations have corporate responsibility programs with a heavy emphasis on Diversity, Equity, and Inclusion (DEI) and (ESG) “Environmental and Social Governance”. Those are the huge buzzwords in the corporate world, with everyone competing to be the most environmentally conscious and as self-sustaining as possible. Every corporation, whether selling shampoo and deodorant, lumber and hardware, furniture and bedding, travel and vacations, financial services and insurance, food and wine—they all want to tag onto the elusive vision of sustainability.

How is Sustainability Defined? The Answer is Difficult to Prove


If we google the word “sustainability”, we find 2.69 billion answers for that term. UCLA wins the contest for the #1 search result with this answer: “Sustainable practices support ecological, human, and economic health and vitality. Sustainability presumes that resources are finite, and should be used conservatively and wisely with a view to long-term priorities and consequences of the ways in which resources are used.” Well, that sure sounds great. Who could argue with that? The devil, however, is in the details. At the dawn of the 21st century, with cities buzzing and alive with workers eager to arrive at impressive office towers to get to work doing important things with investment, insurance services, banking, advertising, and international trade, it would have seemed inconceivable that today many of those towers are largely vacant and the majority of the workforce would rather sit down in a home office with a laptop, able to take the kids to school and walk the dog at their leisure without a stressful commute. In short, the entire urban commercial real estate model has not proved itself to be sustainable. Companies that had a long intimate history with America folded because they couldn’t adapt and change with the marketplace. Names such as Woolworth’s, Sears, and K-Mart have become history. The very definition of sustainability is that a venture has durability over time.


Is ”Sustainable Farming” Just a Buzzword, Or is it Achievable?


People like to throw around buzzwords like “sustainable farm” without really knowing what it means. It’s like “hand carved steaks”, “steel cut oats”, “artisan bread”, “organically sourced,” or “naturally flavored”. What does all that stuff mean, other than making people feel good about whatever they’re consuming? The word “sustainable” has even become political, with those on the left constantly trying to call out those on the right for their lack of political correctness when it comes to sustainability. Trust me, no farmer wants to pursue an unsustainable model. No farmer wants to deplete their soils, dry out their lands, cause massive erosion, or poison the water. The land is their living. Sustainability is not political. However, economies of scale must come to mind when pursuing a sustainable model. Will a crop produce enough income to feed a family? How far is it to bring produce or crops to market? What kind of machinery is needed to farm the land? What are the input costs, and how many acres are needed to produce enough revenue to make it worthwhile? While many people may think sustainability revolves around preserving the soil, water, and landscape, the profit motive may have just as much to do with sustainability as any other factor.


Critical Elements of the Agricultural Sustainability Model—Water, Soil, and Weather


The New Testament of the Holy Bible has many references to sustainable agriculture. “As you sow, so shall you reap,” is just one, but is probably the most pertinent saying when it comes to agriculture. There are no shortcuts to sustainability. While digital currencies, 5G networks, lab-grown meat, and other innovations have been around a few years at most, agriculture is literally the most sustainable means of feeding the population for many millennia and is the oldest method of organized production aside from hunting and gathering. There is much to study when assembling information on sustainable farming methods. We have unsuccessful examples in our history, such as the Vikings who tried to farm on Greenland’s icy shores; the Anasazi who had to abandon their cliff dwellings in the American Southwest; the Pilgrims who couldn’t feed themselves without the help of Native Americans; and Dust Bowl farmers of the 1930’s. But there are many examples of successful farming, and without exception they share these common elements: good soils, plenty of water, and a hospitable climate.


How to Analyze the Model of Sustainable Agricultural Real Estate Investment


Recently I read a magazine piece from some East Coast journal—a publication familiar to most readers—about some New Yorkers who decided to move out West and raise alpacas. It was a textbook example of how to do everything wrong. First, alpacas, which are native to the high Andes of Peru—were a fad that faded out back in the 1990’s. Just like emus, llamas, hemp, lavender, and many other crops, they were popular for a time and then the market disappeared. I have a friend who is one of the foremost dromedary veterinarians in the country, which means he specializes in camels, alpacas, llamas, and other camelid species. He readily acknowledges that there isn’t any money in alpacas, they’re fairly worthless unless you want to go to the trouble of shearing them, but they do taste pretty good, rather like elk. You can buy them all over the place for $100 each from someone who is giving up on the dream. Yet these New Yorkers failed to do their research, and then doubled down on stupid by buying a 40-acre parcel out on the plains east of Colorado Springs with no irrigation water. In the arid West, where the annual precipitation can be 12” or less, small dry acreages are rapidly stripped of vegetation when there is no irrigation water. So, within a couple of years, the New Yorkers were looking at a barren patch of wind-swept dirt and a bunch of worthless alpacas and wondering where they went wrong. Their model was obviously unsustainable. On the other hand, I recently visited some top-tier Iowa farms in mid-July. The corn was already chest high. Iowa is known for its deep, rich soils of glacial loess. It rained twice in the three days I was there, and everything was lush and green. The farms there speak of a deep legacy of health and wealth—the barns are tidy, the homes sturdy and well maintained, the grains silos are new, and the local farmers are all driving new pickups and $300,000 combines. Their model is obviously sustainable.


How Does a Buyer Find a Sustainable Agricultural Investment? Start with the Right Broker


The purchase of a sustainable agricultural investment begins with knowledge and research. The source of that knowledge and research, in the real estate world, is a broker who specializes in farms, ranches, and agricultural properties. Just as there are many types of doctors practicing medicine, you wouldn’t go to a dermatologist for ulcers or a pediatrician for a blown-out anterior cruciate ligament. Make sure to start your search with an accomplished professional who regularly deals in such properties. When I was reading the article about the New Yorkers and their alpaca farm, I was thinking that the real estate agent who sold them the property had committed real estate malpractice. Their disappointment was in large part due to the broker’s incompetence or maybe the broker simply wanted to cash a commission check and didn’t care.


We Are Accredited Land Consultants—Top Experts in Farm Properties


The Realtors Land Institute is an association of the top land brokers in North America, with over 2,000 members. RLI awards one of the most prestigious designations in all of real estate—the Accredited Land Consultant (ALC) designation, which proves a higher level of expertise in land sales. Of the roughly 3,000,000 licensed real estate agents in the US, there are only 615 ALC’s, or roughly .0002% of all practicing real estate agents. Delta County, Colorado, is known as one of the best farming areas in the state with its amazing agricultural opportunities, including cattle ranches, hay farms, and row crop farms raising onions, pinto beans, sweet corn, tomatoes, squash, and all kinds of vegetables. Local orchardists raise peaches, pears, apples, plums, apricots, and cherries, and vintners make some incredible wines. There are 120 licensed agents in the Delta County Board of Realtors, yet there are only three ALC’s—and two of them are in our office!


Ag consultants, farming professionals, soil consultants and other experts


Yes, we are farm and ranch real estate professionals, but we work with all kinds of experts and consultants, and we have a database of professionals that we refer to our farmland buyers. Whether it has to do with center pivot irrigation systems, planting schedules, fertilization amounts and techniques, building microbes in the soil, horse sales, hay yields, contractors, truckers, surveyors, or engineers, we have trusted experts we call on to help our farm clients. I’m the first to admit that I don’t know it all, so I’m happy to send off a soil sample or a hay sample to find out what my fields need to grow a better hay crop. Recently one of my clients wondered if his farms were getting the proper amount of fertilizer. I suggested he engage one of my farm consultants, who visited the farms and made his recommendations. I quickly received a phone call from my buyer, who was very happy with the consultant’s recommendations. It looks like we may be able to quadruple the grape tonnage for his winery. Sometimes it just takes a different set of eyes and solid expertise to analyze the problem.

Farmland is a sustainable investment over the long term


One thing is clear, however, and that is the fact that farmland is one of the best plays an investor can make over time. In many instances, a farm owner can realize a return of 4-5% cash rent on farmland, which may not sound all that great…but when you combine that with a 7-10% annual appreciation in value, on average, it does look great! Our Realtors Land Institute polling shows that land values appreciate 7-10% annually over the past 20 years, which defies all the stock market nonsense. Certain farmland values seem to just go higher and higher every year, and as the great commentator Will Rogers once said, “Buy land. They aren’t making any more of it.” Over time, simply owning land is a sustainable investment. If it has special attributes such as in the path of development, timber, recreation, hunting, live water, or lake frontage, it can become even more valuable. Of course, owning farmland requires a commitment to manage it properly. In some areas, it’s easy to find a tenant farmer to pay a cash lease. In other areas, it takes a commitment of your own time and effort. Regardless, it’s a quiet play, not sexy like a tech stock or a new gym franchise, but a steady solid investment.


Call us for a consultation on how to get started with farmland investments


Several brokers in our office are experts on farm investments. Gary Hubbell, ALC, (970-872-3322) has sold farms, ranches, vineyards, and orchards all over Colorado and Utah. Jake Hubbell, ALC, (970-250-9396) is very knowledgeable about vineyards and wineries and has sold a lot of mountain hunting properties, farms, and ranches. Loren Williams (970-314-0324) has a deep background in farming, ranching, and hunting properties. Brooke Snyder (970) 370-5433 has a lot of experience in hay production and cattle ranching. Call us for a consultation!