Corn, beans, and cotton were all part of Carter Malloy’s upbringing in Arkansas in the 1980s, as he shared his time growing up after his parents divorced. “I was split between the ‘big city’ of Little Rock and our farm near Stuttgart, Arkansas,” Malloy told American Farmland Owner with a smile.
“The idea of ‘work really hard’…that resonates pretty well with most farmers.” That resonated with him, too.
Malloy said that the ethos stuck with him as he went through school, worked as part of the founding team of a global equity investment firm, and sorted through some other business ideas. Eventually in 2018, he became the founder and CEO of AcreTrader.
RELATED: Malloy thinks respect for farming transcends the division of politics. Read his thoughts in this post, “Farmland Doesn’t Care about Politics.”
His Fayetteville-based land investment and technology company has grown into a staff of about 60.
The family farm in Arkansas of his boyhood has also transitioned from cotton to rice, while corn and beans remain the emphasis. Malloy’s career emphasis is providing deep-level information for people like his dad.
And he prepared for that with a dozen years of investing in larger public companies. “I guess the exciting part of that job…what excited me the most was the analysis…was really digging in and…qualitative and quantitative analysis…12 hours a day over and over…you learn Excel pretty well, I guess!”
RELATED: Malloy was appointed to the Agribusiness Industry Council of the Federal Reserve Bank of St. Louis. Learn more about the appointment here.
“Certainly, have a critical eye and understanding investments and compounding and all the fun laws and nature of investing behind that,” he said of his passion for data.
Malloy was a physics major at the University of Arkansas, so he has a had a life-long curiosity of understanding complexities.
“I loved it,” Malloy said of his quest for analysis. “Research and reading and calling people and discovering more information.”
His parents not only instilled the love of farming into him, but they also –perhaps unknowingly – inspired his ambition to create.
Malloy said, “I always wanted to start a business. My mom was an entrepreneur. My dad was, as well. That was always in the back of my head. And I had lots of really bad business ideas that I wanted to start. And fortunately, did not pursue!”
He never lost that connection to the farm. “I also throughout most of my career had been investing in farmland. It’s in my roots to enjoy being out on the farm,” Malloy said.
And a business idea then took root as he realized what was missing in farmland investing. “I was grinding out 12, 15- hour days in public markets with near perfect information on a relative basis between investors. And here’s this multi-billion-dollar asset class (farmland) that I’m in love with any way and find fascinating personally…with effectively no information.”
It became his professional mission to change that. “At the core, that’s where our business came from…make a more efficient market…make it more productive for participants.”
For Malloy, that efficiency and productivity come through connecting with information and resources.
He said that AcreTrader, “connects farmers with growth capital. So, when farmers want to grow their business, we partner with them to buy land. And if investors want to have access to farmland in their portfolio…we allow investors to come and invest in farmland 10-20,000 dollars at a time, rather than millions of dollars at a time.”
Much like his dad added rice to the farm’s production portfolio, he added, too. “We have a sister company called Acres.com. That’s an information business. We built it initially because we need it as investors, though now it is its own business unit and allows folks to come on and find additional information about their land, land they want to potentially acquire or what’s going on in the neighborhood.”
Malloy’s father was aware of what was going on in his own rural Arkansas neighborhood. A nearby farmer wanted to sell. Malloy’s dad wanted to buy but also wanted the right deal. He needed information. His son could provide that.
“Well, what’s that parcel six miles away worth?” Malloy said of the question facing his father.
“And he knows really well what that parcel is worth, plus or minus about 30 percent. And that same rule applies to the neighboring parcel as well. That problem statement is what we have been oriented around. My dad is not a professional land investor. He’s not buying and selling land all the time on a national basis. But he should know and needs a fair rate, as do the neighbors. Expand that situation across, quite literally, millions of families across the U.S,” Malloy explained, which laid out what he feels is his company’s purpose.
“That’s a big part of what we’re trying to do. Help reconcile what defines quality in the first place. How do you know?” he said.
There are numerous factors to consider:
prevalence of tiles on the property
comparable sales in the area
availability of water
Big picture: Not much farmland changes hands each year. Only a percent or two. But that’s still a significant amount of farmland when you think broadly across the country. “On a national level, there’s 50, if not 100 billion…with a ‘b’ that trades hands every year...every single year. And that number is growing,” Malloy said as he put the potential into perspective.
Malloy doesn’t expect the relatively small percentage of land sold this year to change much, even if the Fed lowers interest rates a few times. Yes, rate cuts by the Fed reduce borrowing costs for new purchasers.
But Malloy reminds everyone that farmland debt is not like the housing market. A typical homeowner may finance at least 80% of the purchase price. Whereas farmland debt to asset ratio may be 13 or 14%.
RELATED: “When adjusted for inflation, farm sector equity, assets, and debt are forecast to increase by 3.4 percent, 3.2 percent, and 1.6 percent, respectively,” a USDA November 2023 report stated when comparing expected 2023 changes compared to 2022. Read that full report here.
Farmland’s debt to asset ratio is forecast to drop again in 2023, according to USDA projections, as it has done each year since 2020.
2023 (Forecast): 12.73%
However, he has noticed greater variations when it comes to sales prices. “We haven’t seen a really a really material deviation in bidding practice or prices over the past year. We see in our Acres data a wider dispersion. Rather than having a tight grouping of pricing around the mean, we are seeing a wider amount,” he said.
It’s the higher highs and lower lows. “We see some stuff going for outrageously high prices, the stuff that catches the headlines. And we’re beginning to see some trade at almost irrationally low prices relative to the market. You do see some things …whether it’s just not a well-run process… we do see some things now…’oh, that’s a 10 to 15 percent discount to quote, unquote market.’ We didn’t see a whole lot of that two years ago.”
Malloy is trying to determine the change that artificial intelligence will have on his industry. So far, he sees the changes as minimal. Accessing certain information more quickly can be helpful, aided by AI, he believes.
He offers this example: “Those are like great, OK-trained research assistants and that can be really helpful to find information without having to read 27 different articles.”
But Malley doesn’t see AI replacing much of what he or his staff does. “The underlying data is really all that matters. I do not believe that any time in the immediate term future, computers are going to tell us what a piece of farmland is worth. There are too many idiosyncrasies, too much hyper localized knowledge for that to work,” he said.
The human experience remains very valuable, he believes. “I don’t foresee that happening any time soon just given how much a human needs to be involved in the process. So, call my crazy, I don’t think so. Brokers, manager, appraisers, these on-farm professionals…will be needed in our industry for as long as I can see.”