Thanksgiving has just passed, and as the year draws to an end, it only seems appropriate to reflect on 2019. There is so much to be thankful for in this bolstering economy. Sales have been excellent; our future looks bright and the ranch market is poised for a fantastic 2020. Personally, I have five healthy kids, two are married with spouses I love and proudly call my own. My wife Michelle was not only my childhood friend but married this farm kid 27 years ago, and honestly there’s no place I’d rather be than sitting next to her.
What’s the forecast for 2020: during the 80s and 90s there was a vast transfer of wealth in our country; the Dot com era hit, and the emerging internet created great new methods of business. This efficiency of business created vast wealth which bled into a strong economic growth in numerous sections of industry. This wealth allowed the assemblage of large ranch holdings that will dilute and/or sell as estates transfer generationally. Over the next year, we will see product on the market that has not been available for generations. As an example, Eagle Land will be announcing at the January Realtors Land Institute Colorado Chapter meeting in Denver an 11,000-plus-acre ranch that exactly fits into this generational transfer scenario: This legacy ranch has it all, river, views, timber, trophy hunting, alpine setting, fantastic location and now available after 35 years. With unemployment at a 50-year low, incredibly attractive interest rates and a fiery economy, I predict we will see opportunities unseen in 30 years and ranch sales at an all-time high.
In a previous article, I wrote about the Great Hemp Rush which was the result of the passing of the 2018 USDA Farm Bill. Commercial hemp could now be grown so long as it did not contain over .3 percent THC, tetrahydrocannabinol. Western Colorado was inundated with hemp growers with visions of huge returns as the demand for CBD, cannabidiol, was enormous. Investors flocked to the market purchasing farms, installing state-of-the art drip irrigation systems and partnering with growers with the hope of vast returns. It was anticipated that a grower could expect, on the low end, approximately 1,700 pounds of biomass per acre, but more likely 2,500–3,000 pounds per acre. In April of last year as farms were being prepared for planting, biomass prices were $3–$3.50 per pound for each percentage of CBD oil in the biomass. Estimates of 10 percent oil was conservative, and likely up to 16 percent CBD per pound was not out of line. As an example, if the market was $3 per percentage point and you had 10 percent oil, the value of the crop was $30 per pound. If you produce 1,700 pounds at $30 per pound, the gross crop value would be $51,000 per acre. I can only speak for the Montrose area, but many farmers produced 700–900 pounds per acre on better crops. Oil production is eight–10 percent, and the price has dropped to one to two dollars per point per pound with rumors now as low as $0.65 per point. As a point of comparison, if you produce 700 pounds at $15 per pound ($1.5 per point at 10 percent oil) the gross crop value would be $10,500 per acre—a mere 500 percent below conservative expectations. Finding a buyer for the biomass has been challenging as well. Many growers are sitting on large product inventories hoping for a better price, but many times they’re not selling because they have no idea who to sell to. 2020 will be very interesting as the Darwin theory of “Survival of the Fittest” will certainly come to fruition. Bottom line: some investors will need to sell the farm creating new opportunities for land investors, while growers, without the financial strength to buy land, will have hemp-ready farms available to lease. As new FDA regulations evolve there is much buzz; if blue chip companies can find confidence in the industry, the demand for hemp could explode, exceeding all expectations. Definitely a roller-coaster ride not for the faint at heart!! Have a blessed holiday season, always seek out a qualified Accredited Land Consultant, buy land!!
Joseph (Joey) C. Burns
Lone Eagle Land Brokerage Owner/Broker
RLI Colorado Chapter President