Any ideas on how to invest in farmland? Looking for ways to invest in land that has access to plenty of water. Been thinking about this for a while over the past year or so…are there any REITs that cover this space?
10 bucks says you got this idea from Michael Burry. I don’t think something that specific would be covered in a REIT. Get out there and talk to farmers but I am pretty sure over the last couple of years because of the much higher grain prices and tight supply demand fundamentals there’s been a lot of interest in farmland and prices are much much higher than they used to be. I would first try to gauge how the cost of one acre of farmland has changed over the last couple of years.
I don’t know the issue closely, but this is a fairly old idea, I even heard people talking about a bubble in farmland prices… don’t know if that is true though.
Michael Burry figured it out first. But no, I didn’t get it from him. I’m also considering Uranium as a way to play water shortages in the future.
I have a small allocation to URA. Smaller now after a horrible second half of 2011. I like the supply/demand fundamentals of uranium as well. Thought the earthquake in Japan offered a good entry point. Turns out I was way too early and I underestimated just how much a few nuclear meltdowns freak people out. I’m still a believer in nuclear power long term. Just have to wade through the political risk, especially in France and Germany. Getting the US back on board would be nice too, but doesn’t seem to be able to get off the ground.
uranium…if people actually thought this through…
Ditto. I had expected to hold for 1 year before selling for a profit. Well… 1 year isn’t too far away and I’m not in the black yet…
i think to profit from Uranium, you actually have to know the history and economics of the product, from what I gather…this is a black swan type of commodity…
Sweep the Leg, so far Germany is on track to shut down all its nuclear reactors by 2022. About 8 reactors that were supposed to come back online last year were permanently shut down so I am not sure if Germany is going to back track on this decision. You cant just decide to one day shut down all nuclear reactors and then turn them on the next day. Nuclear power is cleaner and cheaper to generate once you have the reactor running but bringing one on-line or building one is a major decision and extremely capital.intensive. The problem with nuclear power it just doesn’t allow for a possibility for natural disaster. Even if it takes place once every hundred years governments just cant take that chance and risk the lives of its people. Palantir, knowing about agricultural markets is part of my job. 2005/6 would have been a great entry point for farmland but since then there’s been a lot of interest from the financial world. Especially since last year was a stellar year for farmers as they are making a killing with corn at $6.5-7/bushel. These prices match the prices that were seen in 07/08. Whereas in ‘normal’ times farmers would expect to receive between $3.5-4/bu. The reason for the bad harvest has been that the US crop growing regions had one of its driest years yet which would have made a farm with access to water a gold mine. However, I also read that prices per acre of farmland has tripled since the beginning of this decade. There might be good deals out there but you would have to be very cautious. Nowhere is mean reversion more pronounced than in commodity markets.
There’s a lot of time between now and 2022. Zee Germans might be being a little short sighted. Once they figure out how much it’s going to cost to provide power with those plants closed down, they may reconsider. The growth potential comes from the US. If/when our government gets off its ass, that’s the growth catalyst that could provide for a nice payday. Small position…Swing for the fence or strike out type of play. Right now I’m behind the count 0-2. @Palantir - Have you read the key investment themes from MSSB for 2012? Water made the top ten for the second year in a row.
I’m normally a value oriented investor and don’t get too much into macro driven themes so it’s hard to decide decent entry points for me at least. Havent read the MSSB report. Basically I think the ideas we can all agree upon. 1) World is hungry for food, energy, and water. 2) US is *perfect* for growing food like no other country - lots of open land and freshwater with low population in that land. 3) Uranium is I think useful for both energy and water desalination and it seems to be the only energy commodity that has crashed. 4) Farmland ties in both water and food themes.
Your reasoning is spot on what we need to figure out is whether there is an value left or what is a reasonable price to pay for that land because you’re certainly not going to get a bargain for farmland when farmers are experiencing their most profitable years yet. Also, what’s the the timeline on this sort of play? 5, 10, 15 years? I mean yeah I know value investors look at the ‘long term’ but like Keynes said ‘in the long run we’re all dead’
I read the MSSB outlook – 8 out of their 10 best picks for 2011 lost money… i think farmland is interesting too but if you are confident in your views on water you’d need to make sure you were investing in the ‘right’ farmland – there have been studies in the US which show some pretty devastating impacts of climate change/water shortages on land values in the hotter farming regions. http://are.berkeley.edu/~fisher/SFH_2.pdf
Yeah, I got a good chuckle out of that. To be fair, 5/10 outperformed the MSCI All Country World Index, but still some of their 2011 picks were horrendous. Surely they’ll do better this year [/sarcasm].
So basically, they performed as if their picks were all random?
I had some guy who tried to convince me the whole food theme (agriculture stocks)…problem is, knowing the trends does not equate to profit. its a whole other thing to try and buy stocks based on some macro theme while being value oriented…look at oil and who got burned? I’m bullish on oil but so far, my stock pick for that sector has been a negative 15%.
Funny how that works. Except if you would have equally weighted all 10 picks you would have drastically underperformed. Their top two picks, TIPS and HY, returned 11.7% and 7.2% respectively; and their bottom two, Alternative Energy and Emerging Markets, returned -33.5% and -15.9%. This year both MSSB and ML are super bullish on high quality dividend paying stocks. Short accordingly. Sorry for hijacking.
i’m still amazed at how much thought ppl give their picks…