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The Land Group, LLC - Farmland, Timberland, Recreational & Development Land on the Delmarva Peninsula

The Land Group, LLC - Farmland, Timberland, Recreational & Development Land on the Delmarva Peninsula
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A Poultry Market Boom

Chicken Houses

By: Nick Campanaro

For nearly a decade, The Land Group has been involved in both the sale of land for new construction poultry farms as well as the sale of existing poultry farms. 2022 was a record year for poultry farm sales at TLG and we finally decided to dedicate a section of our annual Land Report to educating our readers about the state of the poultry real estate market.

To fully comprehend this market over the last couple of years, we must look back to the aftermath of the pandemic. We can point to 5 key ingredients that have resulted in an overwhelmingly strong market for chicken farms in the region.

1. Strong Protein Markets: Following the pandemic, economic forecasters predicted a strong market for protein products. Nearly all of our poultry integrators on the shore began searching and competing for additional capacity. The strong protein market continues today.

2. Low-Interest Rates (although they are higher currently): As our global economy emerged from the immediate impacts of COVID-19, the Federal Reserve aggressively lowered the federal funds rate (which ultimately controls interest rates) in an effort to rev up our economy which had been momentarily crushed by lockdowns and supply chain issues. These low-interest rates had a direct impact on poultry farm cash flows, as loan payments are typically one of the largest expenses to a chicken farmer. Today we are experiencing higher rates which are causing the cash flows to be tighter and deals to require more cash.

3. Cash In the Market: As the Fed lowered interest rates, the federal government simultaneously began pumping money into the economy via stimulus checks and PPP loans, etc. Paired with a record-setting stock market, there was a ton of cash that entered all real estate markets post-COVID. This cash certainly helped many new and existing poultry farmers to purchase farms. Based on my personal involvement in the market, there still seems to be a large amount of cash seeking to purchase poultry farms in the region.

4. High Cost To Build: As expected, the low-interest rate environment combined with the large surplus of cash injected into the economy has resulted in record-high inflation across many sectors. In particular, the cost of wood and steel (the two largest inputs into poultry house construction) went sky-high. As a result, buyers looking to get into the chicken business or expand their operations were forced to compete over existing poultry farms. There have been very few new construction poultry farms built in recent years. As construction costs remain high, we expect this trend to continue.

5. Escape From City Life: This is an overarching theme that we have experienced across all segments of the real estate market since the pandemic. It goes without saying that lockdowns on a farm are much different than lockdowns in an apartment building in New York City. This trend continues today as we are seeing many chicken farm buyers moving to the Shore from cities all over the Country.

 

These five factors have contributed to a significant boom in the poultry real estate market. Unlike the last poultry land rush we saw nearly 10 years ago, this one is focused on existing farms. Buyers do not have the option to purchase land to build new chicken houses because the cash flows do not support the high building costs. As I write this today (January 2, 2023) the only contributing factor that has recently changed is interest rates. Although this is a major factor when it comes to farm cash flows, we have found there is still enough cash and equity in the market to keep deals flowing.

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Salisbury, MD 21801
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A Poultry Market Boom

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NAVIGATING LAND ACQUISITION

BUYING DIRT BEGINS WITH UNDERSTANDING YOUR GOALS FOR THE LAND.  HERE ARE A FEW BASIC QUESTIONS.

First, what is your intended use of the land? Is hunting a priority, farming, or is it a place to build your dream getaway?

Second, is this an investment requiring annualized return or long-term financial planning?

Third, what is the geography of where you want to find this land? This is perhaps the most important factor…

Fourth, are you considering using a local bank or the regional farm credit system to assist you in the acquisition?

Fifth, do you have a handle on land values? Local list services and land websites do little to assist you in understanding basic dirt value absent of improvements. The Land Group specializes in understanding this marketplace. Join LANDLINK on TheLandGroup.com to learn how we can provide you recent sales data, free of charge, throughout your land search.

An experienced land broker will assist you in addressing these questions and more, as you enter the land market.

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