Texas LAND Spring 2013

saw 2012 expand by more than 24 percent over 2011
prices. The 2011 increase of 20 percent makes the 2012
growth even more remarkable. Anticipated strong prices for
agricultural commodities combined with a fear of inflation in
the future continue to feed demand for cropland.
Large ranch purchases for many millions of dollars also reflect
the current investment climate. Alternative investments
either provide meager returns, present substantial risks, or
combine meager returns with unacceptable levels of risk.
Given these realities, buyers of large livestock operations
appear to focus on finding well-run, profitable operations
that can preserve capital through uncertain times. The goal
appears to be finding a property that can provide cash flow as
well as a hedge against uncertainty and the threat of inflation
and buyers do not shrink from current market prices.
In the middle, scenic ranch properties that formerly enjoyed
strong demand, face a legion of skeptical potential buyers.
Unconvinced that all of the carnage following the economic
melt down is behind us, these buyers hesitate to commit
their capital to landownership under current conditions.
Consequently, sales of these kinds of property have been
infrequent and often required significant retreats from asking
prices. One seasoned broker with a history of handling this
kind of property recently said, ”I haven’t sold a thing in three
years.” This segment of the market continues to await an
emergence of favorable conditions.
Undoubtedly, there are a substantial number of potential
sellers waiting for legions of serious buyers to appear.
Perhaps 2013 will be the year when they come together.
Charles E. Gilliland, Ph.D.
Research Economist
Real Estate Center
Texas A&M University
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