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01-19-2013 12:33 AM - edited 01-19-2013 12:59 AM
Hello. On Friday, I attended a day-long Land Investment Expo in Iowa. Wow, you should have seen the attendance at this thing. There were 25 states and two or three countries represented. Farmers, lenders, and land investment-interest types all convened to hear about the prospects of U.S. farmland and the economy. I'll share my reporter's notebook at the bottom of this message. First, take a look at a few comments captured from Jim Rogers. That's right, theeee Jim Rogers, the perma bull on commodities. He's bullish on farmland. But, he also had other thoughts on the economy.
Jim Rogers, Rogers Holding Company, and perma commodities bull, wore a pink bowtie with pigs on it (notice the pigs are belly up), told the land investment group how he would save the economy.
VIDEO: Hey Ben, let interest rates go
The Iowa Ag Secretary Bill Northey told Marketeye, on the sideline of the Iowa Land Investment Expo, that though interest in Iowa's farmland is high, profitability remains uncertain.
VIDEO: Farmland is a longterm investment
Northey says Iowa needs rain. "We need rain."
VIDEO: It better rain or else.
Now for my takeways:
--Right now anyway, it's still farmers that are the major buyers of farmland. But, investment companies are a growing group of farmland owners in the U.S. And, keep in mind, I'm not talking about just Midwest farmland.
--Farmland prices will rise for at least another three years.
--For 20 years, the world has consumed more than its produced. This means all commodity prices are set to go higher. Go long agriculture.
--Learn how to drive a tractor and speak Chinese. Going forward, farmers will drive lamborginis and Wall Streeters will drive taxis. The U.S. kicks out 200,000 MBA degrees and 10,000 Ag degrees a year. Do the math. Which segment of the job market would you want to be looking for a job?
--Interest rates will not return to the olden days levels, because the U.S. economy can't handle those high rates.
--Learn Manderin. Teach your children Manderin. The 19th Century belonged to the UK, 20th to the U.S., and the 21st will be dominated by China.
--As corn prices go, research shows so goes farmland prices.
--People have been paying down debt, but U.S. consumers are about ready to start rebuilding debt by buying things including a house.
--Uncertainty is the new certainty.
--Regardless of the country, nobody but NObody is as efficient at growing, storing and shipping farm commodities like the U.S.
I hope you find this interesting.
01-19-2013 01:51 AM - edited 01-19-2013 01:52 AM
I agree with you about China, my wife and I went to China about a 1 1/2 year ago and I have never seen more Ferraris and Lamborghinis in one week than my whole life in Chicago. Those guys are making money. The major difference I saw is that we as manufacturers want to make a $100 for products produced, the Chinese want to make $50. So volume drives income. Very simple strategy. Economy 101.
Also, Grain prices have increased over the years because of fuel vs. food and I think we will see grain prices increase over the future years because of global population growth. It is inevitable.
01-19-2013 08:37 AM
To develop the 150 million acres of unproductive land in Eastern Block, Africain and South American countries that are awaiting one simple ingredient...
Farmers driving Lambourgini's???? Gosh, and to think my poor Hungary neighbors, addicted to social assistance already look on me with discontent for driving a John Deere, or even worse a ........Dodge...
Society and politicians don't really like farmers wealthier than they are... Been that way since Adam...
Great article Mike
01-19-2013 08:39 AM
Not much discussion on the state or future of livestock, specifically. But, with a Chinese population of 1.6 billion and growing, there is a bright upside with protein demand.
01-19-2013 08:41 AM
The table is being set. Yep the top is near in farmland values with all the bullish sentiment. When euphoria surfaces , if you have lived long enough you know the end is near . Happens all the time in about every segment, Internet bubble , housing bubble and now the ag bubble is about to be blown to oblivion. How so will it end you say?? Maybe a black Swan event. Watch for a possible implosion in the bonds etc.
or some other event. Maybe just plain ole supply and demand. It will rain in March and April the crop will go in.
Can you survive on 3.75 corn??
Not sure if anyone has a handle on the livestock situation that might be developing
01-19-2013 08:45 AM - edited 01-19-2013 08:46 AM
"Society and politicians don't really like farmers wealthier than they are." That is a great statement. People like that are just scared of what they don't underatnd. John Q is getting farther and farther from understanding the farming industry.
01-19-2013 02:25 PM
425cat- 80% of all Iowa farmland has no debt on it whatsoever. That gives you a $2.52 per bushel of corn cost of production. So 80% of all Iowa farmland owners can survive on $3.75 corn. Sure my net profit will only be $270.60/acre, but I can survive on $3.75 corn.