Investors plowing money into farms
A new twist on the global rush for food: investors are going straight to the source and investing in farmland and equipment. Host Bob Moon talks to Diana Henriques of The New York Times about this new trend.
A farmer plows a field near the town of Arvin, southeast of Bakersfield, Calif. (David McNew / Getty Images)
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TEXT OF INTERVIEW
Bob Moon: World leaders are calling for urgent action to save millions who could go hungry because of soaring food prices. They capped a UN summit with a pledge to break down trade barriers and promote more agricultural production. They also pressed for international aid to farmers who need seed and fertilizer for the approaching planting season.
There's word today of a new twist on this global food rush: a report that investors are now going beyond buying food and grabbing up farms around the world.
We're joined by Diana Henriques, a writer for the New York Times. Thanks for talking to us.
Diana Henriques: Happy to do it, Bob.
Moon: We've been talking a lot here at Marketplace about the run on commodities. Now it looks like there's a run on farmland. What's going on here?
Henriques: Well, obviously commodities have been the hot asset class. Investment so far has been largely in the financial sector, though: index funds, futures contracts. What we're seeing now is large institutional investors, some hedge funds, backed by some hedge fund money or insurance money who are buying into the farm infrastructure -- not just farmland but grain elevators, fertilizer depots, other components of producing food.
Moon: I have to say that when I read your story, some of the people quoted in the story sounded as though buying all this farmland is an act of benevolence here. They're only interested in creating more supply and everybody wins, but they're in this to make money, right?
Henriques: They certainly are in it to make money and you can look at what's happened to farmland around the world to see what has attracted them. Brazilian farmland, which is one of the hotter markets, it's big growth was a few years back, but even so, year over year, April, Brazilian farmland is up by about 16 percent. Now that's a pretty good annual return and you can find much better ones in New Europe, in Australia and even now in the States. A big hedge fund in Connecticut has recently closed on a $52 million deal for farmland in Nebraska. So they still see bargains to be had and obviously what they're looking for is profit.
Moon: So what's the danger that in all this flood of money, we have too few people controlling too much?
Henriques: Well, a concentration of assets, I think, is perhaps not as dangerous as the overall impact of lots of money flooding in and then flooding out. Long-timers in the market are concerned that, as one said, farmland can be a bubble just like Florida real estate. If a lot of financial money pours in, drives up land prices, drives up property taxes, drives up farm rents, it can have a very distorted effect on agriculture only to have them turn around and pour out again when some other asset class becomes more attractive.
Moon: Well, that's the downside. What are the possible benefits here?
Henriques: Well, some of the investors fall in the class of socially responsible investors, those whose clients are public pension funds or endowments or philanthropies who are aimed at public betterment. They have some very ambitious plans for their farmland investments: consolidating little subsistence farms into those than can better use high technology and fertilizers and raise production, and even just more basically, these grain elevators have been under tremendous pressure because of the volatility in the markets so having some of this important infrastructure in strong hands, in the hands of big financial outfits who that can the credit they need to keep things running smoothly, could be a big plus as well.
Moon: Well, good or bad, it appears this is already upon us. Is this the next big thing here?
Henriques: It looks like it is. There are not a lot of big hedge funds that are in this game yet, but certainly more are coming in every week. Now, the dike that's holding back a bigger flood is liquidity. If you're invested in these big structures like farmland and grain silos, you don't turn those over very quickly, so what we're going to see first is a big investment fund whose investors are willing to be more patient, and then we'll see how many of those there are and what impact they have on the values.
Moon: This story from Diana Henriques is in today's New York Times. Thank you for joining us.
Henriques: Happy to be here.
Comments
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From Paonia, CO, 10/08/2009
Looking for a investor partner in Colorados 1st Organic Hop Farm.Crop is entering 2nd and 3 rd year production
organichops@rof.net
coloradoorganichops.com
From greeley, CO, 08/13/2009
I am looking for an investor who would like to buy land in and around the Fort Myers FL area for Fruit and Vegetable production. 30 years of farming and distribution experience. I want to take this to the next level and watch you profit. we rotate crops every 90 days. please contact me if interested. email me at brent.clarkson@comcast.net
From Wilcox, AZ, 03/23/2009
I need 50 million to purchase a dairy and large farm In Wilcox Arizona this would be a sweet deal if I could find the right investor
From London, 02/16/2009
American investors will be welcome to invest in 50,000 acre farm being set up in ghana as we have the same climate as Brazil and cheaper.
From davao city, 01/28/2009
banana farming is good in philippines.
chances for investor
From Bundaberg Qld Aus, 09/13/2008
We are trying to sell our historic homestead circa 1880, veiw our home at
www.gdaypubs.com.au or google former mt pleasant hotel moolboolaman, we will sell for a low $1.2m aus.
From Orono, ME, 06/05/2008
Clearly, makes short-term investment sense-
But - still no mention of constantly increasing Human Population- are you that myopic? Or has some huge intere$t pressed their thumb upon you not to speak of the obvious?
Take a short drive up to Camarillo, some of the richest farm land in the world - 4 crops per year - what are they doing there? Paving it over, building 'Outlet- & Car Malls,' and Condos.
Huh?????
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