Farmland Investment

Canadian Farmland: A Worthwhile Investment?

More info on the Canadian farmland investment premise from Agcapita Partners LP:

www.farmlandinvestment...

Zero till farming allows credits to be claimed in both Alberta and Saskatchewan currently.

A Complete Guide to Agriculture ETFs

The article didn't mention the direct farmland investment fund Jim Rogers advises:

Agcapita Partners

Agcapita focuses on Canadian farmland investment.

Why Invest in Farmland?

The farmland fund that Jim Rogers advises in Canada is Agcapita. The minimum investment in its retail fund is $10,000 and is TFSA and RRSP eligible.

Gold as an Inflation Hedge

On the issue of TIPs there is a quote from Marc Faber that is both entertaining and insightful: "Never ask the barber if you need a haircut. Never ask the realtor if the house you are considering buying is a bargain at the price offered. And never ask the government to calculate the rate of inflation when it can save millions of dollars in cost-of-living adjustments."

An excellent inflation hedge not mentioned in the article - direct farmland investments. Farmland has a very high positive correlation to inflation like gold, but generates consistent income from rents - so much so that it is often described a "gold with yield". Jim Rogers is a big advocate of farmland investments for two key reason - unimpaired fundamentals in the ag space (think “food, feed, fuel”) and returns that have a high positive correlation to inflation. Rogers is on the board of Agcapita, a farmland fund focusing on Canada.

Inflation Hedging: How to Protect Your Portfolio

Another excellent inflation hedge - direct farmland investments. Jim Rogers is a big advocate of agriculture and farmland investments for two key reason - unimpaired fundamentals in the ag space (think “food, feed, fuel”) and returns that have a high positive correlation to inflation. Rogers is on the board of two farmland funds:

Agcapita (focusing on Canada)

Agrifirma (focusing on Brazil)

Commodities for Income Investors

Jim Rogers is on the advisory board of a direct farmland investment partnership in Canada - Agcapita. Farmland investments have a high positive correlation to inflation - farmland is often described as "gold with yield". According to Agcapita Partners data, during the 1970's farmland in western Canada went up over 500% in nominal terms.

Which Asset Classes Are the Best Inflation Hedges?

Another excellent inflation hedge - farmland. Farmland has a high positive correlation to inflation - it is often described as "gold with yield". According to Agcapita Partners data, during the 1970's farmland in western Canada went up over 500% in nominal terms.

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

For those interested Jim is involved with two farmland investment funds:

Agcapita (Canada)

and

Agrifirma (Brazil)

The two have slightly different approaches. Both of course provide exposure to the global ag story but have different micro premises. Agcapita buys land in western Canada, primarily Saskatchewan, to take advantage of the large price differential which has developed between Sask and its neighboring provinces (up to 300% difference) and western Canada and the rest of the world, due to ownership restrictions that have largely been repealed. Agrifirma buys low cost arable land but non-producing land and then does the work to bring it in to production.

Debating Taleb, And Advice-Givers in General

If you want information on the process that led Jim Rogers to recommend investing in Canadian farmland then please see the materials located on the website of the fund on whose advisory board he sits:

Agcapita Farmland Investment Partnership farmlandinvestmentpart...

If you don't have the time to go through the detailed material, here it is in a nutshell:

1. Inflation Hedging - Farmland has been described as “gold with yield” for its strong inflation hedging qualities combined with stable income streams.
2. Competitive Returns - The returns to direct investments in farmland have exceeded stock and bond returns over the last 17, 10 and 5 years (NCREIF US farmland index, Lehman US Bond index).
3. Lower Risk - Direct farmland investment returns have been much less volatile than investments in stocks. Over the long term, farmland may be a convenient way, less volatile way to participate in higher agricultural commodity prices.
4. Real Asset – Farmland is a tangible, real asset with a underlying productive value.

Canadian Farmland

1. Canadian farmland is high quality: Canada is the third largest wheat exporter in the world and in aggregate one of the largest agricultural producers in the world. The three western Canadian provinces alone have approximately 135 million acres of farmland and produce approximately 20 million tons of wheat a year.
2. Canadian farmland is low cost: Agcapita believes Saskatchewan farmland in particular is an undervalued asset. With an average price of approximately $450 per acre, Saskatchewan farmland is some of the least expensive in the world. The prices in Alberta are almost 3 times higher than Saskatchewan at an average of approximately $1,200. Overall, Canadian farmland is one of the lowest priced in the OECD and is even price/yield competitive with emerging markets.
3. Canada has world class farming infrastructure: Unlike investing in farmland in emerging markets such as Argentina, Brazil or Russia, Canadian farmland is supported by first world storage, processing, and shipping infrastructure.
4. Canada has low political risk: Unlike emerging markets, Canada lacks significant political risk. Canadian farmland owners benefit from a transparent and enforceable land titles system with no material risk of de jure or, worse yet, de facto expropriation.

As an aside, I would argue that mainstream financial media is uninterested in discussions about process because they are time consuming and require more thought - superficial analysis is less challenging and quicker.

Five Reasons to Invest in Agriculture

DBA is a useful starting point but there are some interesting alternatives to listed equity based agriculture investments. Direct investments in farmland demonstrate annual returns that exceed equities but with significantly less risk/volatility. In addition, farmland is arguably one of the best inflation hedges available - so much so that farmland has been described as "gold with yield". Jim Rogers views agriculture fundamentals as the best of all asset classes currently. A belief he holds so strongly that he has joined the advisory boards of two direct farmland investment funds:

Agcapita (Canada - some of the least expensive farmland in the world on a $/bu yield basis, then factor in first world infrastructure and low political risk)

and

Agrifirma (Brazil - bringing unfarmed land into production on a large scale)

Farmland Prices from Around the World Show Relative Resilience

Jim Rogers agrees with the premise that the fundamentals in agriculture and in particular farmland are the best of most assets classes currently. The sound underlying fundamentals are one of the factor insulating farmland values from the recent turmoil in the financial markets - that and a history of being an excellent inflation hedge. He is involved with two direct farmland investment funds:

Agcapita (Canada)

and

Agrifirma (Brazil)

John Embry: Gold and Silver Are the Ultimate Insurance Policy

Farmland is an excellent inflation hedge - often described as "gold with yield". Like John Embry, Jim Rogers is another big believer in impending inflation problems. Because of this belief Jim has become involved with two direct farmland investment funds:

Agcapita Farmland Investment Partnership (Canada)

and

Agrifirma (Brazil)

Jim Rogers Is Buying Farmland

The two farmland funds Jim Rogers is involved are:

Agcapita Farmland Investment Partnership

Agrifirma Brazil

Jim Rogers Speaks Out - Where Is He Putting His Money?

The two farmland funds Jim Rogers is involved with are:

Agcapita Farmland Investment Partnership

Agrifirma Brazil

The 'Reflation' Top Ten Portfolio

Inflation is the clear risk ahead. The equity and bond markets have benefited from a long period of low inflation, but ongoing and massive central bank liquidity injections point to a far less benign environment of elevated inflation ahead. Research by our firm, Agcapita Farmland Investment Partnership (farmlandinvestmentpart..., Calgary, Canada based agriculture private equity firm) shows investors must be prepared to rotate into asset classes with different characteristics. During the last commodity bull market & high inflation period in the 1970’s, equities materially underperformed farmland.

- Western Canadian farmland went from around $100/acre to $550/acre (550% total return and 176% in inflation adjusted terms);
- Cash held in a money market account barely kept ahead of inflation (6% inflation adjusted return); and the
- S&P 500 index returned less than 2% per year (a loss of almost 50% in inflation in adjusted terms)

We believe the world is still in the early stages of this current commodity bull market. When agriculture commodities prices are compared against their previous inflation adjusted highs they are significantly discounted implying scope for further increases:
- Corn is US$ 4/bushel currently compared to US$16/bushel in 1974,
- Wheat is US$ 6/bushel currently compared to US$27/bushel in 1974
- Canadian farmland is C$ 660/acre currently compared to C$1,100/acre in 1981

Agcapita allows farmland investors to cost effectively allocate a portion of their portfolios to hard assets in the form of Canadian farmland via its professionally managed Agcapita Farmland Investment Partnership. Agcapita Farmland Investment Partnership is the third in a family of private equity funds which has grown to almost $100 million in assets under management.

Agcapita’s investment team has over 40 years private equity and fund management experience and over $1 billion in total career transactions and previously managed a group of emerging market funds with almost C$500 million in assets for one of the largest banks in Europe.

Agcapita’s advisory Board is composed of accomplished agriculture entrepreneurs and academics, high profile political figures and investment experts including the former UK Chancellor of the Exchequer, Rt. Hon. Ken Clarke and Jim Rogers, co-founder of Quantum Fund.

Jim Rogers is extremely bullish on western Canada and on western Canadian agriculture in particular. At the recent annual CFA awards dinner in Toronto Jim told the assembled crowd of fund managers and investment bankers to “sell your houses, move to Saskatchewan, buy a tractor and some farmland, and start farming”.