Is Farmland the Trade of the Century?
By Chris Nelder
Friday, July 17th, 2009
Friday, July 17th, 2009
What should a long-term investor invest in when stocks and bonds aren't working very well?
I've been asking that question a lot lately.
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"What, then, are they putting their money into?
The answer may surprise you: farmland.
Follow the Smart Money
Legendary investor Jim Rogers has been all over the investing press this year, saying that farmland is his preferred vehicle. "If I'm right, agriculture is going to be one of the greatest industries in the next 20 years, 30 years," he said in a March interview with CNBC. He is now the director of two funds which are developing new farmland in Brazil and Canada.
Major investors who have caught the farmland fever include George Soros and Richard Rainwater. A host investing houses like TIAA-CREF and BlackRock Investment Management have plowed serious cash into the sector as well."
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Bonds continue to be hostage to the Fed's monetary policy manipulations, and as such are entangled in the complex web of the global currency trade. It's a hot area for smart forex traders (and about to get a whole lot hotter) but for most mortals, it's just another way to get burned.
Equities continue to struggle through the recession, with the Dow Jones Industrial Average exactly where it started the year, and the S&P 500 index up a paltry 4%. The NASDAQ is up 20% YTD but I think much of that growth is predicated on "green shoots" hallucinations, and it's probably headed for a fall.
A few stalwarts of the commodity trade have fared considerably better this year, with the Market Vectors-Coal ETF (NYSE: KOL) up a smart 62% YTD and the Oil Service HOLDRS ETF (NYSE: OIH) up 36%. However, the United States Natural Gas Fund (NYSE: UNG) is down 47% on the year, the PowerShares DB Agricultural Fund (NYSE: DBA) is down 8% and the PowerShares DB Corn Index Tracking Fund ETF (NYSE: DBC) sports a mere 1% gain on the year so far.
Even gold, the most traditional safe haven, seems to have lost its luster (though some argue its trade has been manipulated). The SPDR Gold Trust ETF (NYSE: GLD) is up only 6% on a year in which the fear of inflation has loomed over-large.
In my view, oil and coal have gained largely as anti-inflation trades this year, and both could take a good haircut here due to a strengthening dollar, incipient carbon pricing and waning inflationary fears.
Conversely, natural gas and agriculture have been shunned this year as the ugly stepchilds of the commodity trade, and both look ripe for a rebound. While those opportunities are interesting, they are probably good trades for a few months at best. I would not call them safe havens for traditional buy-and-hold investors.
In fact, there may be no such thing. In private conversations with numerous associates of mine, it would appear that the really successful investors—multimillionaire and billionaire money managers with decades of experience-are taking their marbles and going home. In their judgment, the markets are simply too corrupt to play anymore, and Goldman Sachs is Public Enemy #1 with alumni now staffing all the key posts at the Fed, Treasury, SEC, and on down the line. (I will spare you the links on this topic, but a little Googling around should give your blood pressure a good bump.) The unprecedented moves that these entities have made over the last 18 months in an effort to stave off collapse have utterly destroyed what little remained of the "full faith and credit" of the U.S. Government.
What, then, are they putting their money into?
The answer may surprise you: farmland.
Follow the Smart Money
Legendary investor Jim Rogers has been all over the investing press this year, saying that farmland is his preferred vehicle. "If I'm right, agriculture is going to be one of the greatest industries in the next 20 years, 30 years," he said in a March interview with CNBC. He is now the director of two funds which are developing new farmland in Brazil and Canada.
Major investors who have caught the farmland fever include George Soros and Richard Rainwater. A host investing houses like TIAA-CREF and BlackRock Investment Management have plowed serious cash into the sector as well.
Most recently, Qatar, Abu Dhabi, Saudi Arabia, United Arab Emirates, China, South Korea, and Egypt have all made the investing press for taking multi-billion dollar stakes in large tracts of farmland in relatively unexploited areas of the world, primarily in Africa and Asia. Not just because they like the investment outlook, but because they are worried about securing enough food to feed their own populations.
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