There are many reasons you may have clicked on this article. Perhaps you were looking for some fun facts about flax to spice up your next trivia night, or information on your favorite popcorn. Or maybe — just maybe — you were interested in learning more about farmland and how to approach it as a prospect development professional.

If you fall into the latter category, please read on. For the other two areas, I apologize but your favorite search engine may have failed you.

Farmland can be a tricky (dare I say intimidating!) subject for those who do not encounter it often. For instance, here at Mayo Clinic we have many patients from surrounding rural areas, so our research staff encounter farmland almost daily. But if you work for a specialized non-profit in a larger metropolitan area, you might rarely, if ever, encounter it. In this article, I hope to unpack some of the unique quirks around farmland and leave every reader with the knowledge that they too can tackle any farmland questions that might come their way.

Right now you might be asking, “Who is this author and why does he have any authority to write about farmland?” Well, I was supposed to be a fourth-generation farmer and messed up the family heritage in that regard. (Sorry, dad). I found that after beginning my work in prospect development, many of the things I had learned from growing up around farmers and simply took for granted were not common knowledge in the greater community. This article is an attempt to share at least some of that knowledge with you.

Why Understanding Farmland Matters

One of the main reasons farmland is worth knowing about is because of the unique relationships that prospect development professionals have with their gift officers. Knowing about farmland provides another possible angle of entry for the gift officer that they may not have known about it otherwise. Some examples include:

• A prospect is a farmer and owns several parcels of farmland in an LLC that includes their children — who live nearby — as managing members. In this case, it may be worth mentioning to the gift officer the likelihood that the children may also be engaged in the farming operation, and that the farmland is unlikely to be a basis for a gift.
• Conversely, if the prospect is a farmer who owns several pieces of farmland and either has no children or has children that do not appear to be engaged in the farm, this may be an exciting potential opportunity for a gift.
• If a gift officer knows that a prospect has a farming background and is interested in using the farmland as a basis for a gift, the gift officer can use this information to develop a more diplomatic strategy around the prospect. Many families have a deep relationship with their land.
• If a prospect does not have a farming background, holding farmland can potentially be taken as a wealth cue/indicator or as an additional source of income for the prospect.
• Sometimes just the knowledge that a prospect is a farmer or holds their wealth almost entirely in farmland may be an indicator that we do not want to pursue a philanthropic relationship with the prospect at all.

How to Define Farmland

There can be several varying definitions of what farmland is — e.g., cropland, pastureland (for grazing animals) and farm properties with homes, barns, etc.

For the purposes of this article, I will define farmland as cropland — i.e., land that can be used for growing cash crops, such as corn and soybeans, and that can be utilized for income generation (either by growing crops to sell or by renting out the land). Some of my main tips for identifying farmland parcels include:

• Utilizing geographic information software (GIS) to look for telltale signs, such as crop rows/patterns or simply the fact that the land is not developed or forested. Not all vacant land is farmland, but after looking at these for a while you will begin to pick up on the differences.
• Look at the address. In CRM databases/wealth screenings and assessor databases, many farmland parcels will have a more unique address (think more numbers) or less address information than found in the listings for other residential properties.
• You can also look for other clues in the property record, such as class and property use codes that indicate agricultural use and/or photographs that show farm buildings (barns, outbuildings, etc.).

Assessing Farmland Valuation

At this point, some rather tricky methods around farmland valuation must be discussed. Instead of almost all residential properties, which are assessed and taxed at market value, many states assess and tax farmland at its productivity value, which is an estimate of how valuable a piece of farmland will be to the operator for any given year. This is created as a way to keep taxes lower for farmers who would otherwise face a hefty tax bill, given the relatively high market value of their real estate portfolios.

In my experience, more states than not employ this tax strategy, with a notable exception being Minnesota. A couple of simple ways to quickly determine if a value may be off are:

• Using your gut! As prospect development professionals, we have a sense of when things seem incorrect. If you are looking at a 60-acre parcel and thinking it should be worth more than $75,000, you are more than likely correct.
• Another quick way is to employ acreage totals from your database and/or county assessor information and average value per acre from a platform such as AcreValue. Although AcreValue is technically a paid resource, you can access county-level average values for free. (For example, here’s the information for Minnesota.) Multiplying acreage times the average value per acre can give you a useful baseline idea of whether the value you are looking at is right.

Of course, determining the exact value for a specific piece of farmland is essentially impossible unless you specialize in farmland — and even then, it can still be a bit of a guess. Therefore, we should not be expected as prospect development professionals to be experts in farmland. Instead, we should be expected to apply our unique skills and judgment learned from experience in the field to make needed adjustments to more accurately reflect a prospect’s true wealth.

If you find that AcreValue or other online platforms do not have the information that you need, there are several other places you can look. Many state agricultural agencies publish farmland value indexes and reports, such as this one for Kansas from Kansas State University. You may also find that various commercial entities, such as this farmland broker and auctioneer from Iowa, offer information that can be extremely helpful in your work.

The Bottom Line to Understanding Farmland

When it comes to this unique area of prospect research, the good news is you do not need to be a farmer or even rooted in an agricultural area to understand farmland, or to apply this information in your work.

This knowledge is only one of many tools in the prospect development professional’s toolbox, but for the right prospects, it can be a significant one. If you have further questions about farmland and/or this article in particular, please feel free to reach out. I may have failed my farmer father, but I would love to redeem myself at least in part by helping out my friends in prospect development.