Monday, January 7, 2019

Corn and the Price of Farmland

We've been harping on this topic for years, here's a version from 2017:
Our standard boilerplate:
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....
The exception:  (unless you're on the edge of a metro area and have some non-public zoning info)

Now whether the "worth" has any relation to what someone is willing to pay is another matter. And this article specifically talks about production we don't pay a lot of attention to, cattle and cotton. We are keeping an eye open for private equity to move into row crops and wheat but that's not happening in any big way, yet....
So last week when FT Alphaville's Brendan Greeley retweeted Sarah Taber PhD. on farming and slavery, I looked at her timeline and, lo and behold:
"Corn is a platform with both limitless purposes, and one purpose: to turn rural land into a dependable & infinitely fungible financial asset."
Here's the thread:

And here it is on Threadreader.

Additionally, her gift to the reader:

One more on the self-referential channel, this time from 2013:

US Farmland: Price Growth Slows, as Farm Profits Fall (corn now under $5.00)

Farmland is worth it's discounted cash flow. Period.
It may sell for more but at some point it returns to trend. 
It can correct either in price or in time.
That's me, quoting myself.
Yesterday we were urban:

"The Economics of Skyscraper Height (Part I)" 
Tomorrow we'll look at land and corn.
Right now, land and development, urban econ. from Building the's Skynomics blog, Dec. 17: