A Land Broker on Where $2 Trillion in Stimulus Money Will Go and What It Means for Farmland

Vance Crowe [00:00:00] As the crow flies on the Vance Crowe podcast, Steve Brewer, welcome to the podcast.

Coronavirus Perspectives [00:00:09] Yeah, thanks for having me with Vance.

Vance Crowe [00:00:11] So you are in Iowa right now, and you and I met just a few months ago because you run a company called The Peoples Company, which does land dealing. So you, you buy and sell, help people buy and sell land. And I met you because you run probably the most intriguing thought provoking conference that I've ever been to in the United States, Canada, anywhere. And when you and I had a chance to talk on the phone, I thought, man, Steve would be a very interesting person to have on the podcast. So I'm, I'm glad you're here, man.

Coronavirus Perspectives [00:00:43] Yeah, glad to be here and appreciate the comments on the Land Expo.

Vance Crowe [00:00:47] So tell people that have never met you before, a little bit about the People's Company and what, what it is by doing land real estate. What does that even mean?

Coronavirus Perspectives [00:00:56] Yeah, really anything that touches a land transaction we're involved in. So we, we sell farmland, both li listings and auctions. We appraise farmland. We manage farmland for absentee landowners, and then we work with a lot of institutional capital that wants to allocate money to farmland. And we help them do due diligence and acquire farmland and then manage it on an ongoing basis. So anything that touches a farmland transaction, we're involved in, we're based here in Iowa, but we do business in about 22 states around the, the country. So in all the major agricultural production areas, we, we have a presence.

Vance Crowe [00:01:30] So I'm just gonna jump right into it because you have an insight into some stuff that I think is gonna be very important. It may not be really important right away, but I think it's gonna happen fast. And that is the, I just saw a bill floated for over $2 trillion to enter the economy. You know, it's gonna come from basically nowhere, whether we're gonna print it or issue it as bonds, whatever it is, but a whole bunch of money is gonna flood into the system. And where is that money gonna go? What is it going to do? Do you think it's going to impact the price of land?

Coronavirus Perspectives [00:02:03] Yeah, inevitably it will. You know, farmland is, is where people park money. It's an inflation hedge long term. And, and so when you, when you look at the 10 year treasury rate and you look at the amount of capital that's out there, people are looking for real assets. They're looking for a safe place to put money and whatnot. And inevitably that'll translate into higher farmland values. Now you've gotta live to get there first. And so we're, right now we're in more of a liquidity crunch as, as people sit on their hands and they're nervous and they're waiting to figure out where they want to go with their money. But as you study history, inevitably more monetary policy, more money into the system, lower interest rates will lead to higher land values.

Vance Crowe [00:02:44] So you must have had deals going on that should be closing today. Right. What happened to all that stuff that was going on?

Coronavirus Perspectives [00:02:52] Yeah, so far we, this is a busy time of year for us, so we do about 70% of our business from September to March. And those transactions that were in the system, so to speak, are continuing to move forward and close. One of the issues we are running into is that some of the county recorders are shutting down, so you're unable to record mortgages and record deeds and whatnot. So that's been a tricky, tricky thing. In Iowa, for instance, the governor came out and said the real estate industry is in a essential industry. And so we're able to continue to, to move some of those transactions forward. But purchases that were being negotiated, we're seeing buyers feel like, Hey, maybe I can get outta my agreement in some cases, or maybe I can retrade the agreement and try to get a little better deal. And so those are getting handled on a one-off basis. Probably the bigger issue for us is that we conduct a lot of farmland auctions, and that's how a lot of our farmland gets traded. And so I think we've got about three farm auctions scheduled here in the next 30 days, and we add one last Friday. And you know, traditionally that's when everybody shows up. You've got the coffee and rolls, you have a room full of 150 people and the the farming community comes together and, and bids on the sale. And we've had to move those to an online only format so that people can still participate in the sale. And so the big call for us was, do you cancel those auctions and wait and do those later, or do you move forward with the sale? And so we had a, our first sale since this crisis started last Friday, moved it to an online auction only and had a really successful outcome.

Coronavirus Perspectives [00:04:25] We had 20 registered bidders online and, and the farm sold well. And so I think that's where we're gonna head here for the short term is to continue to move, move our auctions onto that platform and continue to have them.

Vance Crowe [00:04:37] Who do you think right now is more eager to come to the table? Is it buyers or sellers? Who, who's, who's right now this in the time of uncertainty?

Coronavirus Perspectives [00:04:45] Gosh, that's a great question. You know, everybody reacts differently to this. We had an old boy call one of our guys in the office last week and said, Hey, stock market's on sale. I've got 80 acres. I wanna sell that thing and bring some some money to the stock market. On the flip side of that, you've got folks that look at farmland as a safe haven and they've seen, you know, the s and p lose two, $2 trillion over the last few weeks. And, you know, farmland, you know, isn't immune to financial crisis, but it's hard to imagine farmland lowering in value 30% over, you know, a two week period and whatnot. So there's there, people will react differently. You're gonna have people that say, you know, my farmland's performed well, the rest of the world's on sale. I wanna move out of farmland and go buy other things cheap. You're gonna have other people that say, you know, I just lost a ton of money in equities and you know, now I just want a safe place to have my money and they'll wanna move into farmland. So a lot of it's the type of capital you have, the stage of life you're in, how you react to that situation.

Vance Crowe [00:05:45] I know you're a broker, so you're kind of sitting in the middle and helping people meet one another, but what are you doing with your money right now?

Coronavirus Perspectives [00:05:52] You know, I'm, I'm definitely not afraid of farmland and, you know, these are the types of environments where, you know, you see opportunities that otherwise wouldn't have existed. And, you know, back in 2008 during the financial crisis, you know, the people that were bold and brave and, and could look past the headlines and could understand, you know, a good deal from a bad deal made a lot of money. And so, you know, history would tell you that when you get into some of these challenging environments to, to, you know, look at the long term and, and don't be afraid to jump in. So, you know, I'm, I'm continuing to expand people's company. We've, we've hired seven new people that'll start over the next two weeks we're opening up. Oh,

Vance Crowe [00:06:31] You're kidding. No way.

Coronavirus Perspectives [00:06:33] No, no. Yeah. And and again, history will tell if that's the right, right decision or not, but, you know, we're on a, we're on a growth trajectory and we're seeing our plan through. And, and so, you know, we're, we're optimistic and bullish about the future.

Vance Crowe [00:06:47] So tell me about what it's like to be taking on employees. You have a huge company of people that are deeply loyal to your, to you and your business and how you guys work. What does it feel like to be leading a company of people that say, Hey, if, if Steve doesn't come through for me, it's not a great job market right now?

Coronavirus Perspectives [00:07:05] You know, that, that, that is something that I hadn't fully felt until here. We had a company, company-wide conference call yesterday to just talk about what the company strategy is and communicate that to the folks that, that work here and whatnot. And, you know, we've told the folks, working's completely voluntary, you can work from home, but we've got about a hundred folks that work here at people's company. And so, you know, there's a lot of, there's a lot of uncertainty around employment right now for a lot of folks. And so we wanted to provide our folks some certainty that hey, we're, we're moving forward and, and we're gonna continue to keep the payroll going and whatnot. And, but yeah, it's, it's, there's a lot of pressure there. If you don't have a strategy, the, the good news for us is that this is actually a slow time of year. I mentioned earlier September to March is when the majority of our transactions happen. And so this is the time of year where we're, you know, doing business development, we're getting our house in order for the next season and whatnot. So if there was a good time of year for the world to stop and the, the, the music to to stop it's now. And so, so we, we've got just a ton of work that we're doing and, and we're building new software and new tools and whatnot to use within the business. And, and so we're just moving all those initiatives forward right now.

Vance Crowe [00:08:20] So I say this not lightly, you are the most well networked person I think I've ever met in my life. I, when I went out to dinner with your group of people that you had invited to the people's company, I was astounded by the level of scientific knowledge that you had people that have extreme expertise. One of the examples I use is one of the guys I gave a ride to the airport after leaving your conference was a guy that measured how quickly warm air flows out of a valley or cool air flows out of a valley in the morning so that you can get more heat units so you can grow more grapes there, right? That is a very rare individual, which means you have access to people that view the world differently. And I know you're a guy that's reaching out, calling, talking with people. What are you hearing out there from your network, from the people that you are connected with that you're not hearing in the regular news?

Coronavirus Perspectives [00:09:15] Yeah, I, you know, I like we talked about, you know, you, you've gotta really think about how you're gonna operate your business and what you're gonna do with your own money and how you're gonna take care of your own family and whatnot. And so, like everybody, I'm scared, you know, and, and so I've reached out to people, including you people that I trust and know and respect and, and really tried to seek opinions. And we work with a lot of financial partners that, you know, you would call smart money and, and folks that you really trust how they would behave in times like this. And so, you know, the last four or five days, all I've done is just sit on the phone and call folks and ask questions about how they're viewing the world and what they're doing and whatnot. And this is really, this is really unprecedented, right? And you know, a lot of folks, there's an old saying, there's no new lessons, just new people learning them

Vance Crowe [00:10:01] And this,

Coronavirus Perspectives [00:10:02] And, and I've always practiced that, but this might be the one time where there are new lessons being learned right now. This is, this is truly unprecedented. And so, so I've tried to reach out to folks and, and, and get their opinions and whatnot. And you know, the, the reality is, you know, you, you can only be so negative and you've gotta believe and be optimistic that, that that something's gonna change here, right? And, and we do know that the government is not gonna let the economy fail, or they're at least gonna try to not let the economy fail. And they're gonna, they're gonna pump money into the system. And that goes to your prior point that farmland values ultimately long term are, you know, you probably should be bullish because you, you're gonna have a large money supply chasing an asset class that has one to 2% turnover and money's gonna be cheap. Now, on the flip side of that, you know, what people aren't talking about so much right now is the price accrued. And in our world, that's a huge thing. So commodity prices are traditionally tied to crude prices. So last week crude was trading around 20 bucks a barrel. So you know, everybody, news, news and

Vance Crowe [00:11:10] For people that don't follow it, what is that in relative, what was it a year ago?

Coronavirus Perspectives [00:11:13] Gosh, you know, and I don't follow it daily, but it was probably 70, 80 bucks a, a barrel a year ago. Geez.

Vance Crowe [00:11:19] Holy

Coronavirus Perspectives [00:11:19] Geez. Yeah. So, you know, there's, you know, the Russian and the Iranian governments and whatnot, they're, they're, you know, pumping oil, trying to destroy each other's, you know, economies and whatnot. And then you're ultimately the, the renewable industry in the US is really who's gonna suffer here. And so you're seeing ethanol plants close down and whatnot. And so, you know, as ethanol plants close down, that's gonna kill corn demand. So we were already fighting through tariffs prior to the coronavirus. So you've got the tariff issue, then you throw the coronavirus in there, and then you throw in cheap crude. And it's, it's a pretty negative outlook right now for, for commodities. And so traditionally when you, when you have cheap money, the 10 year treasury at zero, that's bullish for farmland, but farmland's also tied to commodity prices, which are tied to crude. So you have kinda these competing interests here. And that's where I say it's unprecedented. It's hard to really see or understand exactly how that's gonna play itself out, you know, the dollar strengthening. But, you know, stronger dollar is usually not positive for commodity prices. And, and so as you have this global demand cons destruction relative to the coronavirus that's negative for commodity prices. So I don't, I don't have all the answers here. It's, it's, like I said, it's unprecedented. It's gonna be really interesting to see how this unfolds. But my intuition is just the money supply is gonna trump everything. 'cause there's just gonna be so much money chasing safe assets, and that's what farmland represents.

Vance Crowe [00:12:55] Yeah. The, I mean, the, the idea of putting so much money in there, it's, it's interesting to imagine people are gonna have access to making deals that they likely have not been able to make before that if they had gone to a bank two weeks ago, the bank would've said no way. But now there is so much pressure on those banks to get money out, to keep the credit markets from freezing up, locking up. It's, it's a, it's a weird time. And in an inflationary period, the debtor wins, right? If you cut out the value of the dollar and you've taken on a huge amount of debt, it's, that's the thing. As a guy, I'm on, I'm on the board of directors for a bank that's trying to make solid sound decisions. And it's, it's hard because if you think inflation is coming, then you have to say, do, do we wanna be putting more money out into the market when it's gonna be worth less in the future?

Coronavirus Perspectives [00:13:44] Yeah. In fact, I got a letter yesterday from one of the lending institutions, we do business with unsolicited, unprovoked just said, Hey, we are going to suspend any principal payments on any outstanding loans. And so it wasn't, you know, subject to hardship or anything, it was just one of those letters that said it, you don't need to make principal payments. And so of course I'm gonna show that to all of my banks now that, that we've had one do that. But yeah, un unprecedented times. And it's really hard to know the intuition is that because of cheap money and this, this trillion dollars getting pumped in the system, that that's gonna be inflationary. And on the flip side of that, what if it's not right? And, and so as you think about commercial real estate, for instance, you know, my expectation three weeks ago when you started to see interest rates come down and money come into the system, I thought cap rates and commercial real estate would compress and commercial real estate values would go up as a result of that cap rate compression. Well, the reality is, if your tenant can't pay rent, it really doesn't matter what the cap rate is because if your income stream was destroyed, then your cap rate could be five or it could be nine. But if there's no income there being collected, then the cap rates irrelevant. And so, you know, I I I do think that we need to be cautious to just not assume just because there's massive amounts of money coming into the system that everything's gonna f inflate because the world's fundamentally changed now, right? The, the income streams with businesses.

Coronavirus Perspectives [00:15:17] And then as we talk about agriculture, if you, if you destroy ethanol demand or if, if the tariffs continue with China and you've destroyed soybean demand, then even though cap rates have compressed, that doesn't mean that values will go up. And so just a a small side note in farmland in 2013, that's when the farmland values peaked in the Midwest. And, and that's when we had $6 corn and we had cheap interest rates and whatnot. So here we are seven years out of that commodity cycle where we're more in that $3 corn environment and cash rent rates have came down. Well, farmland values haven't came down to the degree that many people thought. And that's because if you lower rental rates by 50 bucks an acre, but you also lower your return expectation on your farmland by say, 50 basis points, your your farmland value stays relatively the same. And so a lot of people thought farmland values would fall further than they have, but what's saved us is that cap rate compression. And so it's gonna be really interesting to see how this plays out here over the next six to 12 months. Yeah,

Vance Crowe [00:16:24] I have a good friend that was right, I think maybe 15 days out from signing on a multi-unit apartment complex. And, and then this came into the market. So you gotta ask yourself, do I wanna readjust? Just like you were saying, but then you have this added thing of you are not allowed to evict people that aren't paying their rent. So what happens if you're in the commercial real estate area, and it's not even that you don't, you know, nobody wants to evict somebody. You wanna keep your tenants in there, but now you're not allowed to. Now you've just become somebody that is paying money into the system. It's gonna be very, very difficult to, to pull that out.

Coronavirus Perspectives [00:16:58] Yeah, no, that's pretty wild. And and I saw, you know, you know, there's some moratoriums on foreclosure and whatnot now. So if you're a bank, do you wanna loan money to somebody who you may not be able to foreclose on? And anytime you get the government in the middle of this stuff, I mean, inevitably screws up the system. And so what you're describing is really scary.

Vance Crowe [00:17:18] The biggest flip for me from when we last saw each other in January was that, you know, I, I worked for Monsanto and so I got to see the value of large scale efficient agriculture. And, you know, the kind of popular sentiment is that that's bad. And then people don't really like Monsanto. And so when I got in there, I saw the huge value of having these enormous, efficient, effective farms. But now that the, the economy has gone the way that it is, I am damn glad there are some people out there that had free range chicken, small gardens, things like that. Because I, I ended up going out and contacting farmers and having them deliver boxes of meat to me, because to me, the, the, I don't wanna wait around in the line for the grocery store. So there's gonna be a value change there somewhere that isn't right now in the system, I don't think.

Coronavirus Perspectives [00:18:10] Yeah. That, that may be the silver lining. I mean, you know, I think folks are recognizing that the food supply is pretty delicate, right? And, and so I think the fact that we can all go to the grocery store and buy whatever we want on demand, whenever we want a lot of grocery stores, were open 24 hours a day. I, I think that's the silver lining here, is that people are starting to understand that where their food comes from is really important, and having access to cheap quality food is really important. And there was already this movement from the consumer where consumers wanted to know the story, where their food came from, how it was grown, how it was produced and whatnot. And, and so now we're seeing folks that, you know, you watch the social media post and whatnot, folks that are buying half a cow, half a pig, you know, local, locally grown eggs and whatnot. So I, I think that's one of the silver linings as we come out of this, that more people will be more interested in supporting locally produced things where they can control their supply chain and they won't be subject to the disruptions we've seen here over the last couple weeks.

Vance Crowe [00:19:16] A hundred percent. So I've got two last questions for you. The first one is the one I ask everybody, and you can't dodge it, you gotta give it a shot, which is, where do you think the world will be in two weeks?

Coronavirus Perspectives [00:19:29] Y you know, that's a, that's a fascinating question. Obviously the president yesterday made some comments about, you know, the cure can't, you know, can't be worse than the, than the problem, right? And so, you know, the president's laid his his cards on the table and said, you know, the economy's gonna be back in two weeks whether you like it or not. And that's, that's evoked a lot of emotion from a lot of people on, on that, on those comments. But y you know, I I think two weeks from now, you know, you can't slow this economy down. You can't slow down the entrepreneurial spirit of folks, you know, I, it's just been amazing to see how quickly restaurants have converted to, to go services and, and, you know, companies have converted to mobile, you know, conference calls and whatnot like we're doing right now, laptops. And, and so, you know, it's gonna be hard to shut this economy down. And, and I think two weeks from now, we'll look back at this and, and, and this was gonna be a, a one of those moments in life that we all talk about, you know, we all remember where we were when nine 11 happened, and we're all gonna remember this, you know, coronavirus outbreak for a long time. But the reality is, people want to, people wanna work, people wanna support their families, people want to do well. And, and, you know, two weeks from now, I think, we'll, we will be, you know, full speed ahead recovering from this hopefully.

Coronavirus Perspectives [00:21:01] And, and you, you'll be doing that with all this new monetary policy behind you as well. And so, you know, again, the, the smart money folks that I talked to, you know, first quarter GDP growth was great. Second, third quarter is obviously gonna be down, but you get this monetary policy and this money printing press behind us here, you know, I think, you know, you end the year with positive GDP growth and, and that's, that's hard to envision when folks are talking about 20, 30% unemployment right now in the short term. But hopefully this is a short term blip and, and everybody's charging forward after this.

Vance Crowe [00:21:37] Man, I'm, I'm glad to hear you say that I sit from maybe more of a sociology perspective, and I, and I look and say, not only is the Overton window kicked open, wide open where there's all kinds of possibilities that came out, I think that a crisis like this pushes people out to the more radical ideas. And I think within two weeks, you know, we're gonna know whether or not those, that window closes back up and we go back to normal ideas. Or if people are saying, Hey, I wanna see some large changes to the way the world works, and now's the time to do it because everybody, you know, chaos is a ladder and, and people are trying to take opportunities. But I'm, I'm glad to hear your perspective because that hopefulness is one that's hard to have when you're just sitting in your house all all by yourself and, and yeah, kind of secluded from the world. So the final thing is, and I'm gonna try and get this out in time that it can be of value to, to my listeners, you have an economist coming on to talk today. Why don't you talk a little bit about your, what you're planning on your phone call today, and how can people listen in if they want?

Coronavirus Perspectives [00:22:38] Yeah, we're doing a conference call on land values and how this coronavirus is gonna impact land values. So that's gonna be at 10 o'clock central today. If you follow on people's company, social media channels, there'll be calling instructions there. And this was organized last Friday afternoon, one of our former Land Expo speakers, mark Dozer from Texas a and m. We've probably had him on the program three or four times. He's just really insightful. He is entertaining, got lots of great data and whatnot. And so Mark and I were talking again, one of those people I reached out to, we were talking Friday, ended up talking for 90 minutes about, you know, the economy and, and what's this mean for farmland values? And I said, mark, wouldn't this be great if we could just record this conversation and, and let other folks listen to us talk and whatnot? And so that's exactly what we're doing, that that call's gonna be, like I said, at 10 o'clock central today. Eric O'Keefe with the Land Report's gonna moderate the call and we'll post the, the recording of that on our social media channels as well if you aren't able to hop onto the call.

Vance Crowe [00:23:41] Sure. And as soon as that's done, I'll pass, I'll pop a link into, into wherever I post this. Steve, I know you are one of the busiest human beings I know. Thank you so much for chatting, and as things unfold, I, I, I, I'd love to have you back on again. I'm sure we're gonna be hearing a lot more about Coronavirus perspective, so stay safe, keep your employees going strong, and thanks for doing what you're doing, man.

Coronavirus Perspectives [00:24:04] Thanks fans, it's always a pleasure.

Vance Crowe [00:24:05] Talk to you later. Ah.