Read time: 5 min
September 9, 2022
New here? Read our primer on farmland investing.
We analyze deals across FarmTogether, AcreTrader, FarmFolio, and other platforms.
This issue was written by our CFO Brian Jacques, and today he looked at a new offering from AcreTrader – the Bucklake Farm in Crittenden County, AR
Let’s go!
Table of Contents
Offering at a glance
- Name: Bucklake Farm
- Platform: AcreTrader
- Available: 12 September 2022, 1pm CT
- Location: Crittenden County, AR
- Crop type: Rice, Soybean
- Gross cash yield: 3.3%
- Farm price: $3,895,416
- Total acres: 772.9
- Price per acre: $5,040
- Min. investment: $15,120 (30 shares)
- Average net cash yield (after operating exp.): 2.3%
- Net annual return: 8.1%
About the farm
Bucklake Farm is a 772-acre rice and soybean farm in Crittenden County, Arkansas. It is 20 miles from Memphis and in the Mississippi River Delta, known for its water resources and farming history.
AcreTrader offered a very similar farm a few weeks ago – the Jennette Farm, also a rice and soybean farm in Crittenden County. Part of the Bucklake farm is directly across the road from the Jennette Farm. There are some differences between the two, which we will list below.
The Bucklake Farm is a higher risk/higher return offering than the Jennette farm. Bucklake is larger in total acreage, but has less current tillable acres than Jennette. The projected returns are also partially dependent on future improvements.
$345,000 of the offering proceeds will be used to make capital improvements to the property. This includes leveling and dirt work to allow the fields to drain more efficiently and to allow easier access by farming machinery. The capital improvements will also bring more acres into irrigation, which would allow more rice production (the soybeans are grown in dry fields that rely on rainfall for irrigation). If the capital improvement projects are successful, this will allow for higher rental rates due to the increased rice acreage.
The Jennette Farm was a contiguous plot, whereas Bucklake is broken up in multiple parcels. This can cause decreased efficiency in farming, though this is partially offset by the plan to lease the Buckland farm to the same eventual tenant of the Jennette Farm.
There is a 160-acre tract 10 miles east of the farm closer to Memphis. The acreage is dry irrigated, but included in the capital budget plan is the drilling of a well which would allow the acres to be used for rice production (higher value crop).
Other upside features of the farm include:
- Possible future combination of the Buckland and Jennette farms at time of sale to create a larger contiguous plot that would be of high interest to local farmers and institutions.
- Supplemental income via a hunting lease (Bucklake is located in one of the premier duck hunting regions of the US)
The farm has both dry land and irrigated acreage. 232 acres are irrigated by furrow. The water is supplied from existing wells onsite that draw from a reservoir that taps into the Mississippi Alluvial Aquifer (which is replenished by the Mississippi River).
Our view
What we like
- Crops – farm’s output of soybeans and rice are Arkansas’ top two crops; Arkansas is the #1 producer of rice in US (50% of domestic production); rice has shown steady upward pricing, increasing from $4.00 CWT in 2003 to $17.59 in 2022; soybeans are a versatile crop with both feed and industrial uses.
- The projected annual land appreciation of 5.9% appears reasonable when compared to 20-year historical return of 5.4% for Arkansas farmland.
- $345,000 improvement budget (improve drainage and bring more acres into irrigation); planned improvements, if successful, it will increase future resale value of property.
- Solid water resources – the irrigated land is serviced by several existing wells that draw from a reservoir supplied by the Mississippi River; average of 52 inches of rain/year (higher than US average); drainage ditch on property is maintained by local county.
- Soil – Well-suited for rice and soybeans; clay soil holds water which allows for flooding of rice acreage for pest and weed control.
- Supplemental income through upgrades and eventual sale of 160-acre Memphis plot and hunting lease; Mephis acreage is close to interstate, which makes transport of crops easier.
- Possible combination with Jennette farm at time of sale to appeal to larger buyers.
The potential risks
- There’s potential for time and cost overruns for planned capital improvements; capital improvements may not be successful in adding high-yielding acreage.
- Soybean acres (majority of acres) are dry (non-irrigated) which relies on natural precipitation; risk is partially offset by average of 52 inches of rain/year (higher than US average).
- Current non-contiguous nature of plots could make efficient farming more difficult, especially if a different tenant farmer than Jennette Farm is contracted.
- No current tenant farmer under contract for 2023 (though AcreTrader has received several expressions of interest)
- The 160-acre Memphis plot of land requires well drilling and other improvements to turn into irrigated acres.
That’s all for today.
Thanks,
Brian
