Harvest Public Media is a non-profit public media group focused on the same issues as we are here at Sustainable America: food, fuel and systems that tie these two critical areas together. In a recent story about the rising price of farmland across the U.S. corn belt, reporter Abbie Fentress Swanson interviewed land assessors, farmers and investors (private and institutional) who are seeing record profits from speculation and investment in America’s farmlands.
Steve Diggle is CEO of Vulpes Investment Management, a firm based in Singapore that manages a quarter of a billion dollars. He told Swanson that “We paid about $3.3 million for our 650 acres odd in Southeast Illinois in 2009. This year we sold it at auction and we got $5.1 million. That’s 55 percent higher than we paid. Plus we got two yields – one of 3.5 percent and one of 5 percent. So, you know, as an investment, that’s 63 percent over three years. [It] is great and we’re extremely happy with it.” The firm currently has 15% of its total capital invested in farmlands and its easy to see why.
The rush to find good farmland investments has been so intense, that Realty Executives of Kansas City, MO holds seminars to walk would-be investors through the process, teaching them how to determine what is good cropland and how to find farmers to rent the land out.
Dale Hemreck, a broker for the company explained, “There’s probably a higher percentage now of people who are strictly investors, stock market people, money market-type investors, and … they’re buying all types of land.”
With corn prices raging at $8 per bushel, investors are seeing incredible returns from both the crop and the land value. The fear is that a real estate bubble in farmland may be in store. As agriculture economist Ron Plain of the University of Missouri told New Harvest Media, “You get several years going up faster than that long term trend of 6 percent and you’re then in a situation where you’re sort of due for a correction. And the way you correct is pull those land values down – or ‘pop the bubble’ in modern parlance – and so there’s concern about that and it’s kind of reasonable to worry.”
Last week, the Chicago Tribune reported that according to the Kansas City Federal Reserve, “Drought conditions had little effect on the demand for farmland, and bankers expected sales to remain solid even with a seasonal upswing in the number of farms for sale after harvest.”
With farmland as a basis of collateral for most farmer loans, the Kansas Federal Reserve survey represents a closely watched measure of the overall U.S. farm economy. All of these trends are frighteningly reminiscent of the 1980’s U.S. Farm Crisis when massive amounts of farm debts from the 1970’s collided with high interest rates in the 1980’s. Today experts hope that the lower overall levels of debt and record incomes in recent years will act as a hedge against another crisis.
At Sustainable America, we believe that resilient food systems will blend large scale agribusiness with smaller, localized food production. The high price of corn, the recent 2012 drought and the amount of fuel needed for transportation of most food in America are all issues that need to be creatively addressed if we want to create food security for our nation.
Investors Angle for a piece of precious farmland[Harvest Public Media]