I think that there's a lot of money sloshing around the globe right now. Bond rates suck -- at less than 1%, it's almost the same as stuffing the cash under your mattress. Houses/mortgages, a traditionally safe bet, are considered toxic. Commercial real estate loans, the same.
But people like the idea of owning tangible assets, and farmland has long been seen as a stable investment. People have to eat, right?
"We're starting to see more interest in farmland purchases by nonfarm investors," Henderson said. "It's more attractive than other kinds of fixed income investments, CDs, stock market investments. It looks like an attractive rate of return for some investors."
The price of farmland is rising steeply in the midwest; in an era of declining real estate values, it's up more than 10%; and the rise isn't limited to the USA -- in various countries in Africa there's been an increase in foreign ownership of land.
This is partially driven by the cost of grain; Russia had their grain crop fail last year, and prohibited exports. Wheat, corn and soybeans are all used for animal feeds; when one of them goes up in price, others will rise as well, as people feeding animals seek the lowest cost feed solution.
What does this mean? Speculation never leads to price stability. I'm guessing that we're going to see higher prices for food in the near term, and some sort of bust cycle, as is usual with speculation, in a few years.
What's interesting about this is that cropland prices haven't really changed in western Washington. That's because there's so few people farming there's virtually no demand. Farmland in Iowa is selling for $7k an acre. You can get a good, fertile acre of ground here for around $3k.
19 hours ago