T. Marc Schober

Are We Near a Peak in Farmland Prices?

I enjoyed the recap of the Fed reports.

I believe the recent reports from the district banks are proving that farmland is one of the best investments of our time. Down 4% YoY during these times is pretty good.

Farmland is an inflation hedge, just like gold. Farmland pays you to own it though. Over the past 20 years, US cropland has returned 12.5% on average through rent and appreciation, according to the USDA.

The reports show that farmland values are stabilizing. It will be difficult to ever buy farmland at these prices in the future. During these past few months, farmland’s selling season, many auctions have brought record numbers.

The reports showed that “good” farmland had retained its value much better than average or poor land.

Farmland Forecast featured highlights of district bank surveys as well. You can find them at:
farmlandforecast.colvi...
farmlandforecast.colvi...
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Creighton University also has a great Rural Mainstreet Index that surveys rural ag bankers. The November RMI at Farmland Forecast can be found at: farmlandforecast.colvi...

How the Impending Food Shortage Will Impact Agriculture Stocks

This morning, the USDA raised its 2009 corn acreage forecast by 2.0 million acres to 87.0 million acres and its forecast for soybean plantings by 1.5 million acres to 77.5 million acres. Grain prices were sharply lower (corn down almost 8% and triggered the daily trading limit of 30 cents) as the planted acres forecast was considerably higher than the consensus estimate. Also weather conditions have been favorable in the Midwest.

Despite the large increase in planted acres, supplies will still be constrained. I expect the market to now be focused on yields for the remainder of the summer.

Why Invest in Farmland?

Thanks for the great remarks.

I think land prices in rural Kansas will continue to rise. $5,000/acre ground is expensive, but the price can be justified in certain conditions. With all the factors that go into farmland values, and the changes happening globally, farmland values are poised for appreciation, although I don't see 300% changes occurring over the next 3 years.

When valuing farmland, I take the rental rate per acre divided by the price per acre to give me a yield. Currently I am looking to acquire any property yielding 4% or higher. I have seen quite a few top quality parcels yielding over 6%.

As yellowhoard said, land is not inexpensive right now. Reports are showing that farmland has hit a bottom and in my view, is the cheapest it is going to be. US farmland is different than other areas as well. Prices may be higher than the rest of the world, but farmland in the Midwest is some of the best in the world. You have different factors that play into each piece of land, compared to other places in the world, but it is all relative; values will rise.

Ergo, along with farmland values rising, ag companies will benefit. Although ag stocks have had a strong run over the last few months, they should benefit over the long-term from the global demand for grain. Now if you want to invest in farmland specifically, there are not many choices out there. I suggest you look closer at the blog I write for, or contact me.

Agricultural Commodities a Great Opportunity - Marc Faber

You make a good point Jordan. I'm pretty sure yields are rising as well. You're right about the global demand for grains is growing at a faster pace though. Many Asian countries have developing middle classes. These classes used to eat a grain based diet and now they eat a protein based diet. That equates to 10-15lbs of grain to produce 1lb of meat!

I agree with Marc Faber, ag is a great place to invest. It almost always is. This blog talks about a lot of those factors on why ag is a good investment: farmlandforecast.colvi.../

Jim Rogers: U.S. About to Have a Currency Crisis

Jim Rogers has been huge on ag for a while now. It does show some great potential. Farmland could be a great hedge against inflation, especially with demands rising for it. Everyone needs to eat and farmland doesn't grow. There's only a limited amount. I think ag is a good buy right now. This blog always has good stuff on ag: farmlandforecast.colvi.../

Soybeans' Price Gains Are Fertilizers' Loss

Great article. It nice to read one that is so to the point, like others said. It will be interesting to see what farmers do with their fertilizer on beans. There's the huge myth that farmers don't put on as much fertilizer on beans as they should. Will this hurt yields on corn the following year because this year’s beans took too many nutrients? Who knows. This blog talks about these same topics too. farmlandforecast.colvi.../

Five Reasons to Invest in Agriculture

I agree with this article as well. Agriculture is looking like a real safe investment during these rough times. Here is a blog that talks more about how agriculture is a good investment. farmlandforecast.colvi.../

Hao Gin makes some great points

Farmland Prices from Around the World Show Relative Resilience

I agree with all this. Farmland has proven it can hold value during hard times. Last summer was crazy with commodity prices, but overall, agriculture is real safe bet. Some people think it is a bubble that can burst like this article explains, but I agree that it looks safe. Some farmland has lost some value in the US this past year, but it looks like the high quality land isn't losing its value as fast. This blog talks about farmland as well. It goes along with this article pretty well. farmlandforecast.colvi.../