site:climateerinvest.blogspot.com Farmland
The top result (of 5670, not all ours) is a Dec. 19 post "Farmland Price Index Down For 13th Month In a Row".
The Economist was founded out of the politics of free trade and the British Corn Laws-they pushed repeal-which had an interesting effect on the McCormick family, farming and the world at large.
They've been doing this stuff for a while.
More after the jump
From The Economist:
Investing in agriculture
Barbarians at the farm gate
Hardy investors are seeking a way to grow their money
IN THE next 40 years, humans will need to produce more food than they did in the previous 10,000 put together. But with sprawling cities gobbling up arable land, agricultural productivity gains decreasing, and demand for biofuels increasing, supply is not keeping up with demand. Clever farmers, scientists and entrepreneurs are bursting with ideas. But they need money to make this jump.
Financiers more often found buying and selling companies have cottoned on to the opportunity. Farm gates have traditionally been closed to capital markets: nine in ten farms are held by families. But demography is forcing a shift: the average age of farmers in Europe, America and New Zealand is now in the late fifties. They often have no successor, because offspring do not want to farm or cannot afford to buy out family members. In addition, adopting new technologies and farming at ever-greater scale require the sort of capital few farmers have, even after years of bumper crop prices.
Institutional investors such as pension funds see farmland as fertile ground to plough, either doing their own deals or farming them out to specialist funds. Some act as landlords by buying land and leasing it out. Others buy plots of low-value land, such as pastures, and upgrade them to higher-yielding orchards. Investors who are keen on even bigger risks and rewards flock to places such as Brazil, Ukraine and Zambia, where farming techniques are often still underdeveloped and potential productivity gains immense.
Farmland has been a great investment over the past 20 years, certainly in America, where annual returns of 12% caused some to dub it “gold with a coupon”. In America and Britain, where tax incentives have distorted the market, it outperformed most major asset classes over the past decade, and with low volatility to boot (see chart). Those going against the grain warn of a land-price bubble. Believers argue that increasing demand and shrinking supply—as well as urbanisation, poor soil management and pressure on water systems that are threats to farmland—mean the investment case is on solid ground.
It is not just the asset appreciation and yields that attract outside capital, says Bruce Sherrick of the University of Illinois at Urbana-Champaign: as important is the diversification to portfolios that farmland offers. It is uncorrelated with paper assets such as stocks and bonds, has proven relatively resistant to inflation, and is less sensitive to economic shocks (people continue to eat even during downturns) and to interest-rate hikes. Moreover, in the aftermath of the financial crisis investors are reassured by assets they can touch and sniff.HT: Farms.com
Some are already getting their boots dirty. In 2009 Hassad, part of Qatar’s sovereign-wealth fund, asked Bydand Global Agriculture to buy nearly 50 farms in Australia and merge them into a single investment portfolio. Terrapin Palisades, a private-equity firm, bought a dairy company and some vineyards and tomato fields in California, and converted all to grow almonds, whose price has soared as the Chinese have gone nuts for them. Such conversions require up-front capital and the ability to survive without returns for years.
The private-equity approach can take the form of simple improvements, such as changing irrigation from antiquated dykes and canal networks to automatic spray systems: these are the equivalent of picking low-hanging fruit. Pricey robots can boost milk per cow by 10-15%. Using “big-data” analytics to plant and cultivate seeds can push crop yields up 5%. “This is an industry where the gap between the top and bottom quartile is greater than anywhere else,” says Detlef Schoen of Aquila Capital, an alternative-investment firm....MORE
The thing to keep in mind about farmland: It is worth the cash flow it can produce which ultimately means commodity prices rule. If memory serves, U.S. farmland has outperformed prime London residential.
From our Dec. 2007 post "The End of Cheap Food- What was Old is New Again AND: Profiting from Politics":
This story from The Economist got me thinking
(I know, alert the media).
Rising food prices are a threat to many;
they also present the world with an enormous opportunity
FOR
as long as most people can remember, food has been getting cheaper and
farming has been in decline. In 1974-2005 food prices on world markets
fell by three-quarters in real terms. Food today is so cheap that the
West is battling gluttony even as it scrapes piles of half-eaten
leftovers into the bin.
That is why
this year's price rise has been so extraordinary. Since the spring,
wheat prices have doubled and almost every crop under the sun—maize,
milk, oilseeds, you name it—is at or near a peak in nominal terms. The Economist's food-price index is higher today than at any time since it was created in 1845 (see
chart). Even in real terms, prices have jumped by 75% since 2005. No
doubt farmers will meet higher prices with investment and more
production, but dearer food is likely to persist for years (see article).
That is because “agflation” is underpinned by long-running changes in
diet that accompany the growing wealth of emerging economies—the Chinese
consumer who ate 20kg (44lb) of meat in 1985 will scoff over 50kg of
the stuff this year. That in turn pushes up demand for grain: it takes
8kg of grain to produce one of beef....Farm implements!
The Economist's food-price index was created in 1845.
In 1846 The British Parliament voted to repeal the Corn (grain) Laws, reducing the tariff on imported grain, effectively opening the British market to American wheat.
Our post "Global Warming, Politics, Laws and Opportunity" had this list of annual sales of Mr. McCormick's reaper:
1840------- 2
1841--------0
1842--------7
1843------ 29
1844------ 50
1845------ 58
1846------ 75
1847-----800
As can be seen, the politics had quite an effect on the McCormick family fortunes.
In Global Warming, Politics, Laws and Opportunity--Part II:
As reported by The Economist May 16, 1846, the British House of Commons had repealed the "Corn Laws", eliminating the tariff on imported wheat, the day before. Corn in this usage is not maize but rather is generic for grain. Prime Minister Peel won the battle but lost his premiership, the quote of the day was "Peel and repeal."Click that Economist link. I'll wait.
May 16, 1846 "Corn Laws Repealed by the House of Commons"
The bill was ushered through the Lords by the Duke of Wellington, Peel lost his job and the era of cheap food began. It lasted 160 years.
The Economist reported both ends of the story.
Not many publications can say that.
Wikipedia has this last bit:
TriviaIf interested:
The Economist was founded in September 1843 by James Wilson with help from the Anti-Corn Law League; his son-in-law Walter Bagehot later became the editor of this newspaper.
Global Warming, Politics, Laws and Opportunity
Global Warming, Politics, Laws and Opportunity--Part II
(click to enlarge)
