Link to full article Is farmland going to be the next gold? It isn’t as implausible as it may sound. Forecasts are always a sucker’s game, but there are good reasons why the next few decades could see a new boom in farm country—and big money for those who own the land. Demand for food is soaring. The world has consumed more food than it has produced in nine of the past 10 years, Susan Payne, chief executive of agricultural investment firm Emergent Asset Management, told the World Agricultural Investment Conference in London this week. Population is rising fast; another billion mouths to feed will probably be added in just in the next 15 years. And as the developed countries get richer, they want to eat more meat and dairy products. The Chinese eat about four times as much meat per person as they did in the 1980s, says Ms. Payne. These are intensive products. It takes seven pounds of grain to produce one pound of beef. SG Securities estimates that demand for grain alone will rise by 50% to 100% over the next 40 years. We’ve already seen trouble. There were food riots in some countries two years ago. Wheat, coffee and sugar prices have rocketed this summer. Canaries in the coal mine? “We expect to see a resource war around 2020,” says Ms. Payne. A worker irrigates a field in China’s Hainan Province in July. The Chinese eat about four times as much meat per person as they did in the 1980s. ZUMA PRESS They’re not making any more land. Indeed, they’re taking some of it away....
Link to full article Lower commodity prices and higher interest rates are reining in emotional buying as the market settles toward a new reality. Farmland prices the giddy swore were forever—and the contrarians described as a bubble on the verge of popping—are finally at a shifting point. This is not some real estate bubble set to explode and send agriculture into a downward spiral like that of the 1980s. It’s more like a balloon with a small leak drifting lower bit by bit, with occasional bobs of opportunity. John Kurtz expresses it best: “It used to be you could take $5 million and buy any row-crop land, and you’d look pretty smart. Maybe you’d buy it at $5,000, and now it’s $8,000 an acre. It isn’t that easy anymore.” Kurtz is head of Kurtz Auction and Realty, based in Evansville, Ind., a state that reported a 14.5% increase in cropland values during the last 12 months. That pales in comparison to the numbers coming out of South Dakota. Cropland prices there are reportedly up more than 30%, with accounts of some cropland selling for as much as $12,000 an acre. John Horter isn’t jumping into the frenzy. This young farmer and rancher has been out of the land market since 2011, when he bought his last quarter section outside of Bristol. He says current prices are so high that he can’t justify buying land right now. “Commodity prices should be what land values are based on,” he stresses. “Unless corn goes back to $7 and soybeans to $15, I think you’re going to see things taper off.” Horter, who...
Link to full article When Shonda Warner first set out to attract wealthy investors for a fund to acquire farmland across the vast U.S. grain belt, she was almost laughed out of the drawing room. That was back in the halcyon days of 2006, when ordinary mutual funds were delivering double-digit returns, gold gained 19 per cent and mortgage-backed securities and other derivative-based junk were still being snapped up by unwary institutional investors. Heck, even cash accounts were bringing in something north of 4 per cent. “Nobody was interested,” Ms. Warner says with a chuckle. “Nobody would talk to you, because the returns weren’t sexy enough. You can’t argue with people about those kinds of things.” Still, the former derivatives trader with Goldman Sachs suspected a lot of investors would come to rue the day they had listened to Wall Street’s siren song and turned up their noses at her projected real returns of perhaps 10 to 12 per cent annually. Needless to say, Ms. Warner, the affable founder of Chess Ag Full Harvest Partners, turned out to be right. After one of the great financial meltdowns in history and years of miserable returns on a host of mainstream and alternative investments, she finds no shortage of interest or competition today on her own turf. At least five farmland funds have cropped up in Canada, mainly in Saskatchewan and Alberta, where Chess and other U.S. players are kept out by restrictions on large-scale foreign ownership. What they offer is a pricey but compelling story for long-term investors, essentially buying up land, leasing it to growers and collecting a share...
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