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Senior Contributor

$10 billion in investment money waiting on farmland

So, a thinktank out in Oakland, California, issued a report this week showing that there could be as much as $10 billion in investment money sitting on the sidelines on Wall Street ready to pour into the farmland market. 

 

Does this mean we're going to see another price boom sooner rather than later? 

 

Here's more from them. Do you buy it? 

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6 Replies
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Honored Advisor

Re: $10 billion in investment money waiting on farmland

I hope not. That kind of money flooded into hogs in the early nineties in NC. The irresponsible management of one " investment capital" operation caused failure of a 25 million gallon lagoon, which has resulted in gobs of troublesome and expensive regulations for those of us who stayed in agriculture, while that money left faster than it flowed in.

Unless you are hoping to cash in your land and leave farming, this bodes badly.
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Senior Advisor

Re: $10 billion in investment money waiting on farmland

Much of the generational transfer of land stays withing the family or at least within the community.  That land has little visibility to the investor.

 

Farming is a commodity business.  That is, the average return tends to be zero.  The savvy farmer is likely to do better financially than a passive investor so that means the investor ends up with negative returns.  If farmers aren't making money, they aren't paying high rent.

 

I'm skeptical.

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Honored Advisor

Re: $10 billion in investment money waiting on farmland

I think that it is possible, but further down the road.  Like let`s say that a big crop is raised this year and corn gets a "2" in front of it, a couple years like that it could look awful ugly out here.  Farmers can`t shutdown their factory, because their fixed costs are such that sitting idle isn`t an option.

 

That could lead to a replay of the `80s with different players.  Farms that seemed so precious @ $14,000/acre would have to be liquidated at any price just to keep the rest of the operation fed.  The ag lenders have learned their lessons, the government and public no longer sees farmers as Norman Rockwell saw them.

 

Unless there`s some sort of production cutting event for our own good, prices find a market value way below COP.  There could be some very reasonable land out there.  If you have 10,000 acre farmers going belly up, who could or would step up?  There are always more willing farmers than acres to go around, but if grain would be below COP for an extended period, what lender would touch them?

 

Big investment money would be a source.   I can hear the investor shpeal, "we are doing a good thing by putting a needed cash infusion into agriculture, to insure that the nation`s food supply remains uninterupted".......yeah, they are all heart Smiley Happy    But longer term, with "9 billion mouths to feed"  I can see their logic on buying the dips.  And maybe what we`re looking at near term will be kind of a severe dip.   or maybe not.

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Veteran Advisor

Re: $10 billion in investment money waiting on farmland

that works out to a million acres at $10,000 per acre. two million at $5000 per acre.

 

Corn and soybean acres alone are about 150-175 million acres, right?

 

so , not a huge dent in the ownership, and if things tank, someone is going to have to step in and buy out those 30,000 acre farmers.

 

I guess I have investment money, waiting, too, as far as that goes.

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Senior Advisor

Re: $10 billion in investment money waiting on farmland

I'm investing in a buggy whip factory. By the time the baggers get done we will be back to the horse and buggy

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Senior Advisor

Re: $10 billion in investment money waiting on farmland

Kay - BTO at it's finest  -  1st Japan  now China -interesting article although a few billion ?

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