Investors Aim to Tap Ag's "Super Cycle"
In a New York City ballroom actor Michael Douglas made famous with his "greed is good" speech in the movie "Wall Street," 400 pension and fund managers, investment bankers and some of the world's largest farmers gathered this week to discuss the latest hot prospect in institutional investment: farmland.
The Who's Who of Wall Street financiers now interested in channeling billions of new dollars into cropland ownership in the U.S., South America, Eastern Europe and even Africa include heavy hitters like UBS, Franklin Templeton, Morgan Stanley, TIAA-CREF, Rabobank and John Hancock.
Underlying the investment frenzy is the knowledge that global food demand will double by 2050 and skepticism that seed companies and agribusiness can engineer higher yields to solve the problem. In that case, millions of new acres will need to be brought into cultivation and current cropland pushed to its max for productivity, which is why investors are interested in both farmland and virgin land that can be planted to crops. The need to bring more land into soybean production is especially acute as China and India improve their diets and yield advances have lagged corn.
"People really do believe agriculture is headed for a super cycle," said Kenneth Van Heel, global director of Dow Chemical's pension fund, which is stepping up its land investments, primarily in the U.S. "Across the industry, there are so many investments to be made."
Many of the would-be farmland owners are no neophytes to U.S. or global agriculture. Gary Taylor, former president of Cargill Cotton, spent 38 years immersed in the commodities business worldwide and already owns 7,000 acres in his personal portfolio. Now he and a partner have launched a farm real estate investment firm to purchase farmland in the Mississippi River watershed. They favor corn, soybean, cotton and rice land with good access to water and the benefit of Mississippi River basis for the best market prices. With what he knows about growing world trade in agriculture, Taylor expects U.S. farmland to double in the next five years.
A soon-to-be-released study by the World Bank found that institutional investors already have announced plans to acquire up to 125 million acres in global farmland, about the land mass of Germany. In the big scheme of things, that might not sound like a lot, but the issue is that it's just the beginning, said John Lamb, World Bank agribusiness team leader....MORE
HT: Dr. Hazlett @ The Climate+Energy Project blog