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February 20, 2007
The Future is Farmland
Some fascinating stuff in a Bloomberg article on how corn farms have replaced New York lofts as hot property:- Price increase y-o-y of crop land in Idaho/Indiana: 35%/16%
- Price increase y-o-y of Manhattan lofts: 12%
- U.S. farmland area decrease 1981-2001: 9.6-million acres
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So is Jim Rogers, and I think they're both right. It's great, timely and investable thesis.
The risk to these corn farm investments is the USA lowering the import tariffs to Brazilian ethanol (made from more-efficient sugarcane).
Buy farmland in countries with stable property rights that stand to benefit from growing domestic populations and falling tariffs. Chile would have been ideal 10 years ago.
With all due respect to Mr. Sancio above, there is almost no risk of a farm bubble due to brazil. Even if brazil switched entirely to sugarcane they wouldn't be able to come close to satisfying the ravenous US fuel needs. And, if they did so, then they would be taking millions of acres of soy beans out of production. US farms are, to a first approximation, in a bean/corn rotation. Currently beans aren't as profitable as corn, so more corn is grown. If beans became more profitable (if, for example, brazil took bean acres out and the market still wanted a bunch of beans) then the US would grow more beans.
Marc Faber is on a rant about Farmland and I think he is right.