Thread: Buy farmland.

For a while I have believed that owning some farmland would be a very wise investment for the future given current problems that the word faces.

This last 6 months I decided to act on that and purchased a very small rice plantation in Thailand (on the hunt for some more) and a decent sized farm in Australia.

My father just forwarded an email onto me which was encouraging to read as with any business decision you are always nervous if you made the right decision or not.

Here it is:


I've written to you several times before about the boom in agricultural markets. The dynamics of this change are pretty simple, though we might lose sight of them during these crazy markets. As the wand of prosperity has touched China and India and the rest of the emerging markets, so have the diets of the people changed. They tend to eat better, which puts pressures on the grain markets.

So what we see is grain inventories falling to lows not seen in more than 40 years. So at some point, we should expect to see rising prices for grains - and for the farmland that produces them.

Meanwhile, the amount of arable land per person is falling. I wrote about this in my newsletter Capital & Crisis ("The Topsoil Crisis"). The gist of it is that we are losing quality topsoil faster than we are replacing it.

There is a growing scarcity of good farmland. And you see countries that import grains - such as Saudi Arabia and China and South Korea - trying to lock down farmland.

Agcapita points out that the per capita amount of arable land on the planet has dropped sharply over the last 50 years, and is likely to continue dropping. From 2.8 acres per person in 1960, the amount of arable land has dropped to slightly more than one acre today.

Now, we don't need 2.8 acres per person anymore, because of advances in agriculture over time. But gains in yield per acre are slowing. Over the last 40 years, we've increased the yield per acre by 2.1% per year. But the pace of those gains is slowing. Since 2000, the increase in yields per acre has averaged less than 1% per year.

We may see new innovations in seeds or other technology that we can scarcely imagine now. But it also seems that any solution would take some time and money to implement.
Meanwhile, the world's agriculture markets just get tighter and tighter…

Demand is strong. In 1974, cereal crop consumption was about 1,500 bushels per second. Today, it's 2,600 bushels per second. So we have a double effect here. We have increasing population and increasing consumption per person. Agcapita estimates that cereal crop consumption will double again over the next 20 years. The amount of pressure on the global food supply network is enormous. This, again, is a reflection of people eating better and eating more meat - which requires exponentially more grains to produce.

There is another wrinkle to the story: Most every oil-consuming country has put in place biofuel targets that will kick in over the next five years. These places include the U.S., the EU, Canada, Japan, Brazil, India and China. To meet their targets, according to work by Agcapita, we'll have to commit some 240 million acres to biofuel production. That represents about 50% of the arable land in North America and about 6% of all the arable land in the world.

As you can see, the biofuel craze puts further pressures on farmland demand.

So that's where we are in a nutshell. For these reasons, I'm bullish on agriculture assets in general, and farmland in particular.

The other appealing aspect of farmland is how well it did in the inflationary environment of the 1970s. I think we're headed to another 1970s-style inflation. Right now, we're in the midst of a (temporary) deflation wave sweeping over commodity-land. But the dollar, as we know, is not hard to reproduce.

Governments, particularly in times of crisis - like now - have a tendency to flood the system with money in an attempt to "goose" the economy. Mostly, such efforts have succeeded in destroying the value of the currency

The unfolding credit crisis just gets worse and worse…

It seems like every day we get some news of a new bank failure, or takeover or some revelation that reminds us that all is not well. And the markets keep sinking…

The U.S banking system lies in shambles, like the U.S. fleet at Pearl Harbor in '41. This is no garden-variety downturn, no little dip in the road to higher prices.

I've given a lot of thought to what might be a good spot to hide out - and even prosper - during this crisis. Precious metals immediately come to mind: Owning some gold or silver is a comforting thought. But what else?

I keep coming back to something really basic: farmland.

Recently, I spent a few days in an old chateau in the countryside of Normandy, France. There is a tiny town about a mile from the chateau, but otherwise, it is a picture of things pastoral - green meadows… cows cropping grass and taking in the sun… a Jacobin farmhouse… miles of farmland all around… Since I've been writing and talking about farmland, I had a deeper appreciation for just how useful such land is.

Really, I can think of no better asset to own during any kind of financial crisis. In some ways, farmland is even better than gold or silver. At least farmland is an intrinsically useful thing. It provides a tangible yield in the form of good things from the earth. We all have to eat. As consumers trim their sails, they'll give up a lot before they give up their calorie intake. In fact, worldwide, the per capita calorie intake is likely to rise, as I'll get into

Originally Posted by MeMock

The only difference is access to water.

Saw a documentary about Murray River (believe what it was) farmers. These folks lived way downstream near the sea and have been virtually put out of business because all the water is being used upstream. In Oz, water and increasing drought is a serious problem.

In Thailand, generally plenty of water but areas where irrigation water is unavailable, crop production is limited.

Depends how much you have to buy into these famrs for these days with good water.

I remember in years gone by nearly buying a cattle station with a mate.

I remember thinking $5million for one was an aweful lot.

Now some are selling for $80million.

Like I said, depends how much you have to pay these days. Older cockey's with land holdings or younger generations with farms handed down have not had to pay these large sums of today.

But being away from Oz for 6 years, i not really sure on prices now.