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Barclays Plc (BARC), the U.K.’s second- largest lender by assets, created a 100 million-pound ($163 million) fund to support renewable energy farm projects.
The fund was developed with the National Farmers Union after a Barclays survey found that 37 percent of the U.K.’s 200,000 farmers are seeking to cut their energy bills and generate income using renewable energy, the London-based bank said today in a statement.
The U.K. reduced the incentives it pays to developers of large solar projects this year and is shifting its focus to funding smaller residential and commercial projects. The government aims to generate 15 percent of the country’s energy from renewable sources by 2020.
Download your FREE Renewable Energy Investments Report here
Farmers “are looking forward to many further years of lower energy costs and a potentially new income as they sell energy back to the grid,” Travers Clarke-Walker, a product and marketing director for Barclays, said in the statement.
The average size of solar, wind and hydroelectric projects likely to receive financing through the fund will be 44 kilowatts, Barclays spokesman Michael O’Toole said in a telephone interview. The bank expects the costs of wind and solar projects to fall by half in the next three to five years and may increase its investments in renewable power. It bought Aug. 11 an 85 percent stake in a 26-megawatt wind farm in eastern England.
Barclays surveyed 300 dairy farmers in England, Scotland and Wales this month and 60 percent said they expect renewable energy to generate revenue for their businesses, according to the statement.
Download your FREE Renewable Energy Investments Report here
Some are already doing so. Renewable energy “looked like a good investment because of government feed-in tariffs and we wanted to offset some of our business costs,” Andrew Hawkey, 58, a third-generation farmer from Cornwall, said in an interview.
Barclays financed a 250-kilowatt ground-mounted solar farm that’s in operation now on Hawkey’s land near Wadebridge, and he wants to borrow 120,000 pounds to add another 50 kilowatts of capacity. He said the solar panels may cut his power bills by about 30 percent.
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Source: Bloomberg
DGC Asset Management
DGC Asset Management Limited provide Investors with the opportunity to engage in strategic mid term and long term asset-backed investments within the Agricultural, Timber and Renewable Energy sectors.
Tuesday 30 August 2011
Thursday 11 August 2011
Jim Rogers Shuns Gold for Farmland Investment
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
by Jason Jenkins, Investment U Research
Wednesday, August 10, 2011
Jim Rogers is no stranger to Investment U. In May, our Executive Editor, Garrett Baldwin, interviewed the investing legend and got his ideas on everything from a tertiary education bubble to a long-term commodity bull market.
When the world’s major markets find themselves in peril, everyone seeks out a trusted voice of reason – someone who has achieved success over the long haul.
So it shouldn’t be peculiar that the co-founder of the Quantum Fund made some news over the weekend.
Jim Rogers is even more down on the U.S. government than most…
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers’ Three Crucial Observations
Rogers doesn’t believe the market is in shambles due to the downgrade of our rating by Standard & Poor’s or the possibility of a double-dip recession, but because we are the greatest debtor in the history of the world.
What should be taken from Rogers’ statements this weekend are three of his crucial observations:
Jim Rogers Loves Buying Undervalued Assets
What Jim Rogers saw in gold and silver over a decade ago, he now sees in agriculture. Agriculture prices are still, on a historic basis, extremely depressed, and this is where he sees his next opportunity. Rogers thinks that the current commodities supercycle will last for 20 to 25 years. So if this commodity bull started in 1999 or 2000, this bull will run until about 2020 to 2025.
Another overlooked option is direct investment in farmland. Farmland investments will pay a regular yearly dividend from the sale of crops, and can provide long-term capital gains during a bull market in food. Some direct farmland investment vehicles include Agrifirma in Brazil, Agcapita in Canada, and Chess partners and Hancock in the United States.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Source: Investment U
by Jason Jenkins, Investment U Research
Wednesday, August 10, 2011
Jim Rogers is no stranger to Investment U. In May, our Executive Editor, Garrett Baldwin, interviewed the investing legend and got his ideas on everything from a tertiary education bubble to a long-term commodity bull market.
When the world’s major markets find themselves in peril, everyone seeks out a trusted voice of reason – someone who has achieved success over the long haul.
So it shouldn’t be peculiar that the co-founder of the Quantum Fund made some news over the weekend.
Jim Rogers is even more down on the U.S. government than most…
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers’ Three Crucial Observations
Rogers doesn’t believe the market is in shambles due to the downgrade of our rating by Standard & Poor’s or the possibility of a double-dip recession, but because we are the greatest debtor in the history of the world.
What should be taken from Rogers’ statements this weekend are three of his crucial observations:
- He will not be buying stocks. Stocks are going to be, at best, in a trading range for years to come. He compared the current environment to that of the 1970s when equities were problematic.
- Rogers is a value buyer. He stated in 2000 that a “supercycle” commodity bull market had begun. Commodity prices would advance longer than in any previous uptrend. The raw materials surge would be led by gold and silver. Eleven years ago, gold was trading near its low at $252 – the lowest real price in nearly a century. Silver was selling at $4. Eleven years later, it’s up 650 percent.
- Rogers has currently stopped buying gold and silver. He’s not selling because he still believes that gold will hit and surpass $2,000 an ounce sooner rather than later. Rogers went on to elaborate “that gold prices are not in a bubble because not everyone is buying yet.” The question is, if he’s holding gold and silver long but not buying more of it, what is he buying?
Jim Rogers Loves Buying Undervalued Assets
What Jim Rogers saw in gold and silver over a decade ago, he now sees in agriculture. Agriculture prices are still, on a historic basis, extremely depressed, and this is where he sees his next opportunity. Rogers thinks that the current commodities supercycle will last for 20 to 25 years. So if this commodity bull started in 1999 or 2000, this bull will run until about 2020 to 2025.
- You can invest directly in agricultural stocks, such as John Deere (NYSE: DE) or Monsanto (NYSE: MON).
- Another method is to invest in agricultural futures through exchange-traded funds (ETFs), such as Agriculture ETF (LSE: AIGA) on the London Stock Exchange or PowerShares DB Commodity Index (NYSE: DBC) in the United States.
Another overlooked option is direct investment in farmland. Farmland investments will pay a regular yearly dividend from the sale of crops, and can provide long-term capital gains during a bull market in food. Some direct farmland investment vehicles include Agrifirma in Brazil, Agcapita in Canada, and Chess partners and Hancock in the United States.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Source: Investment U
What Investors Should Buy: Jeremy Grantham - GMO
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
I only really follow closely one company that fits the bill as a farmland investment and that is Canadian company Sprott Resource Corp (SCPZF.PK). Sprott owns 2.1 million acres of cropland stretching across Alberta, Saskatchewan and Manitoba. Sprott has exposure to gold, silver, oil and fertilizer, but its One Earth Farms has big plans:
“The goal of One Earth Farms Corp. (“One Earth Farms”) is to become Canada’s largest fully integrated corporate farm. A true partnership between the private sector and First Nations, One Earth Farms represents a new model for North American farms. One Earth Farms is committed to becoming an industry leader by delivering superior results and a reduced risk profile through economies of scale, professional management and progressive farming practices.”
Avoid Everything Else
The rest of the letter is classic Grantham, a grumpy old bear. He views global equities not covered above as ranging from unattractive (as of August 2) to very unattractive. He thinks that 950 is fair value on the S&P.
Like many investors, I follow the investment actions of a short list of well respected professional value investors. Near the top of that list is Jeremy Grantham.
Grantham’s letters to investors are usually pretty depressing. He has a knack for spotting bumps in the road and rarely thinks stocks are cheap. So when he provides some advice on what to buy rather than what to avoid I sit up and pay attention.
In his most recent quarterly discussion he did exactly that (link).
Grantham Suggestion #1 – Farmland/Forestry
Grantham comes as close to pounding the table on an investment idea with farmland and forestry. His exact words are “ for those with a long horizon, I am sure well-managed forestry and farmland will outperform the average of all global assets."
I’m not sure I’ve ever seen him use the word “sure” before.
I only really follow closely one company that fits the bill as a farmland investment and that is Canadian company Sprott Resource Corp (SCPZF.PK). Sprott owns 2.1 million acres of cropland stretching across Alberta, Saskatchewan and Manitoba. Sprott has exposure to gold, silver, oil and fertilizer, but its One Earth Farms has big plans:
“The goal of One Earth Farms Corp. (“One Earth Farms”) is to become Canada’s largest fully integrated corporate farm. A true partnership between the private sector and First Nations, One Earth Farms represents a new model for North American farms. One Earth Farms is committed to becoming an industry leader by delivering superior results and a reduced risk profile through economies of scale, professional management and progressive farming practices.”
At the current stock price of $4.79 I think Sprott Resource is a good long-term bet given the value of its net assets comfortably exceeds that and because management will undoubtedly grow those net assets at a healthy clip.
Grantham isn’t the only smart guy who thinks farmland is a sure bet. Investment biker Jim Rogers and housing meltdown star Michael Burry have both indicated a focus on the sector.
Grantham Suggestion #2 – Resources in the Ground
Grantham hedges a little on suggestion number two simply because so many of them have increased so much over the past five years. Grantham’s words on resources in the ground were:
“I think it is likely that resources in the ground, hydrocarbons, metals and fertilizer, will also win on a 10-year horizon. I am not certain, though, because of the remarkable gains in so many of these in the last five years. I would put the odds at 2 to 1. As mentioned last quarter, many commodities have the potential for very sharp declines in the short term. If that occurs, then the odds would, of course, rise.”
Strangely there is one company that offers exposure to hydrocarbons, metals and fertilizer. It is again Sprott Resource Corp which I mentioned earlier. But as an investor you could also consider a company affiliated to Sprott Resource Corp and that is Sprott Inc. (SPOXF.PK). I recently provided some detail on Sprott Inc.
The idea is pretty simple. Sprott Inc. is an investment manager focused on all of those resources in the ground that Grantham mentions. If these commodities do well then Sprott’s funds will do well which will in turn attract more investor dollars. I consider it a leveraged play on commodities.
If you are interested in exposure to oil and like to sleep at night I would strongly encourage you to check out Penn West Energy (PWE) which has massive amounts of land in Western Canada that is going to have a lot of oil unlocked by horizontal drilling techniques. Penn West currently yields over 5.5% on existing production and that production is going to ramp up for years as Penn West takes new technology to its land base.
Grantham Suggestion #3 – Quality Stocks
Grantham has been suggesting a focus on blue chip quality for a while. Here is his most recent advice:
“On a regular time horizon, I would continue to overweight quality stocks, which may well be on a roll. They are not priced to make a fortune, but they are priced to give approximately 4.5% to 5% real return, which I think is acceptable for low-risk assets. They have also delivered dependable downside – risk off – relative performance for several years, which is a characteristic generally in short supply.”
Here are the top holdings from the GMO U.S. Core Fund at the end of June 2011, loaded with blue chip quality ideas:
Microsoft (MSFT) 4.8%
Pfizer (PFE) 4.6%
Wal-Mart (WMT) 4.1%
Oracle (ORCL) 3.8%
Google (GOOG) 3.2%
IBM (IBM) 3.2%
Johnson and Johnson (JNJ) 2.8%
Merck (MRK) 2.7%
Procter and Gamble (PG) 2.7%
Coca-Cola (KO) 2.5%
Exxon Mobil (XOM) 2.4%
Qualcomm (QCOM) 2.3%
Philip Morris (PM) 2.1%
Verizon 1.8% (VZ)
Pepsico 1.8%
Total of top holdings: 44.8%
Grantham Suggestion #4 – Emerging Markets
Grantham said emerging markets will outperform other non-high quality equities for the next seven years. Grantham points out that in a global financial crisis the foreign reserves held by these emerging economies are twice what is held by developed countries and can help the rebound more quickly or help investors weather through.
Grantham carefully suggests that these developing countries are moving toward the profitability of the developed world:
“Emerging markets are hard to evaluate because they are clearly going through many phases of development in a real hurry. So what is normal profitability? Probably not the old levels. They are moving toward developed status and probably toward our developed world’s level of profitability. (Yes, James Montier, that would be a change and, therefore, I admit, far from certain.)”
Grantham Suggestion #5 – Japan
At the bottom of his recommendation list but still a recommendation nonetheless is Japan, of all places. Grantham’s thesis here is interesting as he thinks Japanese companies may be able to finally move profitability levels toward those of other developed countries.
Here is what Grantham had to say:
“We at GMO also believe that Japan is likely to “regress,” in the mathematical sense, toward levels of profitability that would be considered normal in other developed countries. We expect the progress to be very slow and uneven.
If it does not happen at all, then Japanese stocks are priced like the average of all other developed equities, or a bit cheaper. If, however, by some chance margins improve quite fast, then Japanese stocks will likely be the best performing stocks around and could hit double-digit real returns for seven years. Japan’s remarkable resilience in the face of electricity shortages gives some inkling of what they are capable of. How quickly we have forgotten the nation's obvious talents of 20 years ago. Can all of those talents really be lost forever?”
Avoid Everything Else
The rest of the letter is classic Grantham, a grumpy old bear. He views global equities not covered above as ranging from unattractive (as of August 2) to very unattractive. He thinks that 950 is fair value on the S&P.
Generally Grantham thinks rise avoidance is a good idea. He suggests cash is a good idea not just because it is a safe haven, but also for its optionality as dry powder to take advantage of opportunities.
Source: Seeking Alpha
Farmland Investments Raise 16% Annual Returns
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Perry Vieth baled hay on a neighbor’s farm in Wisconsin for two summers during high school in 1972 and 1973. The grueling labor left him with no doubt about getting a college degree so that he’d never have to work as hard again for a paycheck. Thirty-eight years later, and after a career as a securities lawyer and fixed-income trader, Vieth is back on the farm.
Except, now, he owns it. As co-founder of Ceres Partners LLC, a Granger, Indiana-based investment firm, Vieth oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. He’s so enthusiastic about the investments that he quit a job in 2008 overseeing $7 billion in fixed-income assets at PanAgora Asset Management Inc., a Boston-based quantitative money management firm, to focus full time on farming, Bloomberg Markets magazine reports in its September issue.
On a spring afternoon, Vieth, 54, barrels along backcountry roads in a Jeep Cherokee in Indiana and Michigan to scout a fruit orchard and corn and soybean farms to buy. Rural towns with names such as Three Rivers pass by in a blur, separated by a wide horizon of fields with young crops popping up.
“When I told people I was leaving to start an investment fund in farmland, they said, ‘You’re doing what?’” says Vieth, in a red polo golf shirt and khakis. “It will always be difficult for Wall Street firms to understand. It’s not like buying stocks on a computer.”
It’s much better: Returns from farmland have trounced those of equities. Ceres Partners produced an average annual gain of 16.4 percent after fees from January 2008, just after the firm started, through June of this year, Vieth says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
George Soros
The bulk of the returns are in rent payments from tenant farmers who grow and sell the crops and from land appreciation. The Standard & Poor’s GSCI Agriculture Index of eight raw materials gained 5.3 percent annually over the same period, and the S&P 500 Index (SPX) dropped almost 1 percent.
Investors are pouring into farmland in the U.S. and parts of Europe, Latin America and Africa as global food prices soar. A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 percent of South American farmland venture Adecoagro SA.
Hedge funds Ospraie Management LLC and Passport Capital LLC as well as Harvard University’s endowment are also betting on farming. TIAA-CREF, the $466 billion financial services giant, has $2 billion invested in some 600,000 acres (240,000 hectares) of farmland in Australia, Brazil and North America and wants to double the size of its investment.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers
“I have frequently told people that one of the best investments in the world will be farmland,” says Jim Rogers, 68, chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1996. “You’ve got to buy in a place where it rains, and you have to have a farmer who knows what he’s doing. If you can do that, you will make a double whammy because the crops are becoming more valuable.”
The growth in demand for food, spurred by the rising middle classes in China, India and other emerging markets, shows no signs of abating. Food prices in June, as measured by a United Nations index of 55 food commodities, were just slightly below their peak in February. The UN’s Food and Agriculture Organization said in a June report that it expects food costs to remain high through 2012.
So many investors have rushed to capitalize on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20 percent in the first quarter compared with a year earlier.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Safe Haven
“Yes, farmland will be a bubble again; all agricultural products will be in a bubble again,” says Rogers, who is an investor in Agrifirma Brazil Ltd., a South American farmland owner.
Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers Holdings Inc. (LEHMQ) filed for bankruptcy in September of that year and the S&P 500 plunged 43 percent in the next six months. He purchased 8,000 acres in Uruguay, three smaller plots in southern Illinois and an 80-acre New Zealand kiwi-and-avocado orchard.
“We really thought all the investment banks would go under,” says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. “Everyone said, ‘Buy gold.’ But at the end of the day, you can’t eat it. If everything else goes and I just have these farms, it makes me moderately wealthy.”
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
‘Prosperous China’
The hedge fund Diggle co-founded, Artradis Fund Management Pte in Singapore, suffered about $700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management Pte. Diggle plans to incorporate his five farms into an investment management group run by Vulpes.
From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he’s witnessed aspiring locals eating their way up the food chain.
“You can see what a more prosperous China will consume,” Diggle, 47, says. “It means more dairy, more meat -- not just pork and chicken.”
Investors find in farmland a respite from the cyclical price swings of the commodities market. Since 1970, there have been at least four price jumps of at least 100 percent that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of an acre of farmland tracked by the U.S. Department of Agriculture has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Leaving BlackRock
“Farmland is the lowest-risk part of the value chain, but it’s also a key part of production,” says Jose Minaya, TIAA- CREF’s head of natural resources and infrastructure investments.
In the U.K., where farm prices are also rising, one money manager traded his career at BlackRock Inc. (BLK) for one in farming. Graham Birch, 51, left in 2009 as the London-based head of the natural resources team at BlackRock, the world’s biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.
Birch, who says farming has suffered from a lack of investment and management talent, has spent $1 million on improvements. He now captures all of the effluent from his 600- cow herd, stores it in a 4 million-liter (1-million-gallon) steel tank and uses it as fertilizer for his crops. “At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do,” Birch says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Wall Street Roots
Ceres Partners’ Wall Street roots are evident in the firm’s makeshift office in an old clapboard farmhouse that sits in the middle of cropland. Lucite tombstones resting on a shelf in a small room mark deals done by Brandon Zick, a former vice president of strategic acquisitions at Morgan Stanley (MS)’s investment management unit. Vieth hired Zick in January to help analyze and manage farm purchases.
Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P 500 options. After a series of stints running an arbitrage team for Fuji Securities Inc. and other firms, he was hired as chief investment officer of fixed income at PanAgora, the quant firm, in 1999.
By about 2006, Vieth’s concerns about the economy were mounting: Inflation was at a low, and the dollar had peaked as U.S. debt and deficits soared. So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts U.S. crop exports.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Falling Dollar
Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres’s point person with tenant farmers.
As the dollar fell 24 percent against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends. So, in late 2007, he founded Ceres, just as tightening credit markets began to push the global economy into a recession.
He named the firm Ceres for both the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago. “I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify,” Vieth says. By May 2011, he had collected 17,238 acres, mostly in the Midwest.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Shade and Rocks
When Vieth wants land, he goes shopping, as he does with Zick and Blum under a partly cloudy southern Michigan sky in May. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.
The trio drive by a 337-acre farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter. “Those trees will shade the corn and stunt growth,” he says. Blum doesn’t like the many rocks scattered on the unplanted dirt. Zick is skeptical that the bank will get its asking price of $7,000 an acre in a foreclosure sale.
The investors next visit a farmer they hired, Ed Kerlikowske Jr., who grows watermelon, peas and corn on their 782-acre spread near Berrien Springs, Michigan. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that they would otherwise have to spend on land. “To really grow the business in today’s economy, you need partners,” Kerlikowske says as he passes around slices of fresh watermelon.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Possible Bubble
The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
In March, then-FDIC Chairman Sheila Bair devoted a symposium to the topic in Washington with the participation of economists, bankers and agricultural experts. “If there is a bubble in farmland prices, I hope the bulk of any correction is borne by investors such as hedge funds and not by the banking industry,” William Isaac, chairman of the FDIC during the farm banking bust and now senior managing director of FTI Consulting Inc. (FCN) said during the event.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Overpaying
Charles McNairy, whose family has been involved in agriculture since 1871, says neophyte investors who lack a deep understanding of farming are making bad deals. In 2009, McNairy started U.S. Farming Realty Trust LP, a fund based in Kinston, North Carolina, that had raised $261 million as of late May to buy farms, according to a Securities and Exchange Commission filing.
McNairy says funds such as Ceres have been overpaying for land, based on the return from crops. “Ceres shouldn’t be buying in the Midwest,” says McNairy, who declined to disclose the states he invests in. “It’s crazy to be buying up there.”
Vieth disagrees, saying Ceres’s returns prove that his strategy is working. “I certainly don’t want to start slinging mud, but I don’t know what the heck he’s talking about.”
Greyson Colvin, who started farming fund Colvin & Co. LLP in Anoka, Minnesota, in 2009, dismisses the idea of an overheated market. “After the housing bubble, people are a little too quick to assign the word bubble these days,” says Colvin, whose two funds and separately managed accounts hold 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Head Winds
Colvin, a former analyst at UBS AG (UBSN) and Credit Suisse Group AG (CSGN), says U.S. farmers aren’t carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23 percent, is expected to fall to 10.7 percent in 2011, according to Agriculture Department estimates.
Vieth’s farm funds are facing head winds in coming months and years: A likely rise in interest rates will push up his acquisition costs and the value of the dollar, which in turn might hurt commodity exports. While the former trader keeps a close eye on the dollar, he says farming will continue to thrive.
Investors seem to agree. At a dining-room table in the farmhouse in Granger, Vieth sits down at his computer one evening and totals the day’s haul: another $900,000 from investors looking for comfort -- and profits -- in one of the oldest and most essential industries on the planet
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Soucre: Bloomberg
Perry Vieth baled hay on a neighbor’s farm in Wisconsin for two summers during high school in 1972 and 1973. The grueling labor left him with no doubt about getting a college degree so that he’d never have to work as hard again for a paycheck. Thirty-eight years later, and after a career as a securities lawyer and fixed-income trader, Vieth is back on the farm.
Except, now, he owns it. As co-founder of Ceres Partners LLC, a Granger, Indiana-based investment firm, Vieth oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. He’s so enthusiastic about the investments that he quit a job in 2008 overseeing $7 billion in fixed-income assets at PanAgora Asset Management Inc., a Boston-based quantitative money management firm, to focus full time on farming, Bloomberg Markets magazine reports in its September issue.
On a spring afternoon, Vieth, 54, barrels along backcountry roads in a Jeep Cherokee in Indiana and Michigan to scout a fruit orchard and corn and soybean farms to buy. Rural towns with names such as Three Rivers pass by in a blur, separated by a wide horizon of fields with young crops popping up.
“When I told people I was leaving to start an investment fund in farmland, they said, ‘You’re doing what?’” says Vieth, in a red polo golf shirt and khakis. “It will always be difficult for Wall Street firms to understand. It’s not like buying stocks on a computer.”
It’s much better: Returns from farmland have trounced those of equities. Ceres Partners produced an average annual gain of 16.4 percent after fees from January 2008, just after the firm started, through June of this year, Vieth says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
George Soros
The bulk of the returns are in rent payments from tenant farmers who grow and sell the crops and from land appreciation. The Standard & Poor’s GSCI Agriculture Index of eight raw materials gained 5.3 percent annually over the same period, and the S&P 500 Index (SPX) dropped almost 1 percent.
Investors are pouring into farmland in the U.S. and parts of Europe, Latin America and Africa as global food prices soar. A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 percent of South American farmland venture Adecoagro SA.
Hedge funds Ospraie Management LLC and Passport Capital LLC as well as Harvard University’s endowment are also betting on farming. TIAA-CREF, the $466 billion financial services giant, has $2 billion invested in some 600,000 acres (240,000 hectares) of farmland in Australia, Brazil and North America and wants to double the size of its investment.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers
“I have frequently told people that one of the best investments in the world will be farmland,” says Jim Rogers, 68, chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1996. “You’ve got to buy in a place where it rains, and you have to have a farmer who knows what he’s doing. If you can do that, you will make a double whammy because the crops are becoming more valuable.”
The growth in demand for food, spurred by the rising middle classes in China, India and other emerging markets, shows no signs of abating. Food prices in June, as measured by a United Nations index of 55 food commodities, were just slightly below their peak in February. The UN’s Food and Agriculture Organization said in a June report that it expects food costs to remain high through 2012.
So many investors have rushed to capitalize on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20 percent in the first quarter compared with a year earlier.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Safe Haven
“Yes, farmland will be a bubble again; all agricultural products will be in a bubble again,” says Rogers, who is an investor in Agrifirma Brazil Ltd., a South American farmland owner.
Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers Holdings Inc. (LEHMQ) filed for bankruptcy in September of that year and the S&P 500 plunged 43 percent in the next six months. He purchased 8,000 acres in Uruguay, three smaller plots in southern Illinois and an 80-acre New Zealand kiwi-and-avocado orchard.
“We really thought all the investment banks would go under,” says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. “Everyone said, ‘Buy gold.’ But at the end of the day, you can’t eat it. If everything else goes and I just have these farms, it makes me moderately wealthy.”
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
‘Prosperous China’
The hedge fund Diggle co-founded, Artradis Fund Management Pte in Singapore, suffered about $700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management Pte. Diggle plans to incorporate his five farms into an investment management group run by Vulpes.
From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he’s witnessed aspiring locals eating their way up the food chain.
“You can see what a more prosperous China will consume,” Diggle, 47, says. “It means more dairy, more meat -- not just pork and chicken.”
Investors find in farmland a respite from the cyclical price swings of the commodities market. Since 1970, there have been at least four price jumps of at least 100 percent that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of an acre of farmland tracked by the U.S. Department of Agriculture has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Leaving BlackRock
“Farmland is the lowest-risk part of the value chain, but it’s also a key part of production,” says Jose Minaya, TIAA- CREF’s head of natural resources and infrastructure investments.
In the U.K., where farm prices are also rising, one money manager traded his career at BlackRock Inc. (BLK) for one in farming. Graham Birch, 51, left in 2009 as the London-based head of the natural resources team at BlackRock, the world’s biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.
Birch, who says farming has suffered from a lack of investment and management talent, has spent $1 million on improvements. He now captures all of the effluent from his 600- cow herd, stores it in a 4 million-liter (1-million-gallon) steel tank and uses it as fertilizer for his crops. “At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do,” Birch says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Wall Street Roots
Ceres Partners’ Wall Street roots are evident in the firm’s makeshift office in an old clapboard farmhouse that sits in the middle of cropland. Lucite tombstones resting on a shelf in a small room mark deals done by Brandon Zick, a former vice president of strategic acquisitions at Morgan Stanley (MS)’s investment management unit. Vieth hired Zick in January to help analyze and manage farm purchases.
Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P 500 options. After a series of stints running an arbitrage team for Fuji Securities Inc. and other firms, he was hired as chief investment officer of fixed income at PanAgora, the quant firm, in 1999.
By about 2006, Vieth’s concerns about the economy were mounting: Inflation was at a low, and the dollar had peaked as U.S. debt and deficits soared. So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts U.S. crop exports.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Falling Dollar
Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres’s point person with tenant farmers.
As the dollar fell 24 percent against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends. So, in late 2007, he founded Ceres, just as tightening credit markets began to push the global economy into a recession.
He named the firm Ceres for both the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago. “I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify,” Vieth says. By May 2011, he had collected 17,238 acres, mostly in the Midwest.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Shade and Rocks
When Vieth wants land, he goes shopping, as he does with Zick and Blum under a partly cloudy southern Michigan sky in May. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.
The trio drive by a 337-acre farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter. “Those trees will shade the corn and stunt growth,” he says. Blum doesn’t like the many rocks scattered on the unplanted dirt. Zick is skeptical that the bank will get its asking price of $7,000 an acre in a foreclosure sale.
The investors next visit a farmer they hired, Ed Kerlikowske Jr., who grows watermelon, peas and corn on their 782-acre spread near Berrien Springs, Michigan. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that they would otherwise have to spend on land. “To really grow the business in today’s economy, you need partners,” Kerlikowske says as he passes around slices of fresh watermelon.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Possible Bubble
The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
In March, then-FDIC Chairman Sheila Bair devoted a symposium to the topic in Washington with the participation of economists, bankers and agricultural experts. “If there is a bubble in farmland prices, I hope the bulk of any correction is borne by investors such as hedge funds and not by the banking industry,” William Isaac, chairman of the FDIC during the farm banking bust and now senior managing director of FTI Consulting Inc. (FCN) said during the event.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Overpaying
Charles McNairy, whose family has been involved in agriculture since 1871, says neophyte investors who lack a deep understanding of farming are making bad deals. In 2009, McNairy started U.S. Farming Realty Trust LP, a fund based in Kinston, North Carolina, that had raised $261 million as of late May to buy farms, according to a Securities and Exchange Commission filing.
McNairy says funds such as Ceres have been overpaying for land, based on the return from crops. “Ceres shouldn’t be buying in the Midwest,” says McNairy, who declined to disclose the states he invests in. “It’s crazy to be buying up there.”
Vieth disagrees, saying Ceres’s returns prove that his strategy is working. “I certainly don’t want to start slinging mud, but I don’t know what the heck he’s talking about.”
Greyson Colvin, who started farming fund Colvin & Co. LLP in Anoka, Minnesota, in 2009, dismisses the idea of an overheated market. “After the housing bubble, people are a little too quick to assign the word bubble these days,” says Colvin, whose two funds and separately managed accounts hold 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Head Winds
Colvin, a former analyst at UBS AG (UBSN) and Credit Suisse Group AG (CSGN), says U.S. farmers aren’t carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23 percent, is expected to fall to 10.7 percent in 2011, according to Agriculture Department estimates.
Vieth’s farm funds are facing head winds in coming months and years: A likely rise in interest rates will push up his acquisition costs and the value of the dollar, which in turn might hurt commodity exports. While the former trader keeps a close eye on the dollar, he says farming will continue to thrive.
Investors seem to agree. At a dining-room table in the farmhouse in Granger, Vieth sits down at his computer one evening and totals the day’s haul: another $900,000 from investors looking for comfort -- and profits -- in one of the oldest and most essential industries on the planet
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Soucre: Bloomberg
Friday 17 June 2011
New Farmland Sale Record Set in IL: $13,500 Per Acre!
The Illinois farmland investment market rings up another record this year as a plot of land sold for $13,500 per acre.
The transaction was made on June 3, just eight days after setting a record of $12,900 per acre. Both sales were in Champaign County.
Last fall, an area of farmland was sold in Iowa for $13,950 an acre.
Economist say farmland is a hot investment in the market right now because of its stability.
The transaction was made on June 3, just eight days after setting a record of $12,900 per acre. Both sales were in Champaign County.
Last fall, an area of farmland was sold in Iowa for $13,950 an acre.
Economist say farmland is a hot investment in the market right now because of its stability.
Is a Arkansas Farmland Investment Boom Coming?
In news from Arkansas, demand for farmland there has spiked dramatically since a year ago. While other investment vehicles still remain stagnant, rising grain prices have rocketed farmers into acquisition mode.
Commodity prices and farmer profits have spurred what may be called a sort of Arkansas land bonanza of late. Profits are being directly re-invested into buying more farmland, while interest rates make such purchases even more desirable. Now investors other than farmers are seeing benefit as well, which is only making the demand rise too. Lee Vermeer, AFM, Vice President of Real Estate Operations at Farmers National Company, had this to say about the situation:
“While 75 to 85 percent of land buyers continue to be farmers, interest among outside investors has risen. Despite the robust demand driving sales activity levels, reports show that lenders are taking a relatively conservative approach to lending. Strong profits the past few years have provided cash for farmer buyers, while investors are taking cash from other sources to rebalance portfolios.”
Land prices are rising in other areas of the country as well. Flooding and other factors, combined with the growing demand for certain crops, has made farmland investment a viable alternative even for commercial investors. Tennessee, Mississippi, Arkansas, Alabama, western Kentucky, Louisiana, and southern Missouri are all seeing the same kind of price increases as Arkansas.
Monty Meusch, an expert from Farmers National Company, reported on land prices in Iowa, Kansas, Missouri, Nebraska, and South Dakota recently, showing cases where prices far exceeded expectations in recent land auctions. And while not much is mentioned about prices tied to high tech alternative fuels, food shortages, and similar market drivers, it seems clear farm land will see sustained price and demand stimulation.
The Watt reports 2011 seeing a 20 % rise in demand for biofuels, and already Brazil is on the verge of severe constraints where the ethanol industry there is concerned. Land may soon come at a bigger premium than any other real estate commodity.
Arkansas and other agriculturally grounded states may be the first to see farmland prices spike, but as the demand for farm products grows, farmers everywhere will clearly rich in cash to invest elsewhere. Georgia, South Carolina, North Carolina, and others of the Southern states once abundantly agricultural, may well see a resurgence with the need for biofuels and more argi-business.
But like all markets, farm land is also tied to so many other crucial sectors – in short, good news for some generally means higher prices and constraints for others. We will follow how these economies affect Arkansas’ other real estate sectors.
Source: http://realtybiznews.com/arkansas-land-boom/9873448/
Commodity prices and farmer profits have spurred what may be called a sort of Arkansas land bonanza of late. Profits are being directly re-invested into buying more farmland, while interest rates make such purchases even more desirable. Now investors other than farmers are seeing benefit as well, which is only making the demand rise too. Lee Vermeer, AFM, Vice President of Real Estate Operations at Farmers National Company, had this to say about the situation:
“While 75 to 85 percent of land buyers continue to be farmers, interest among outside investors has risen. Despite the robust demand driving sales activity levels, reports show that lenders are taking a relatively conservative approach to lending. Strong profits the past few years have provided cash for farmer buyers, while investors are taking cash from other sources to rebalance portfolios.”
Land prices are rising in other areas of the country as well. Flooding and other factors, combined with the growing demand for certain crops, has made farmland investment a viable alternative even for commercial investors. Tennessee, Mississippi, Arkansas, Alabama, western Kentucky, Louisiana, and southern Missouri are all seeing the same kind of price increases as Arkansas.
Monty Meusch, an expert from Farmers National Company, reported on land prices in Iowa, Kansas, Missouri, Nebraska, and South Dakota recently, showing cases where prices far exceeded expectations in recent land auctions. And while not much is mentioned about prices tied to high tech alternative fuels, food shortages, and similar market drivers, it seems clear farm land will see sustained price and demand stimulation.
The Watt reports 2011 seeing a 20 % rise in demand for biofuels, and already Brazil is on the verge of severe constraints where the ethanol industry there is concerned. Land may soon come at a bigger premium than any other real estate commodity.
Arkansas and other agriculturally grounded states may be the first to see farmland prices spike, but as the demand for farm products grows, farmers everywhere will clearly rich in cash to invest elsewhere. Georgia, South Carolina, North Carolina, and others of the Southern states once abundantly agricultural, may well see a resurgence with the need for biofuels and more argi-business.
But like all markets, farm land is also tied to so many other crucial sectors – in short, good news for some generally means higher prices and constraints for others. We will follow how these economies affect Arkansas’ other real estate sectors.
Source: http://realtybiznews.com/arkansas-land-boom/9873448/
Largest Ever Farmland Investment For Sale
Savills has been instructed to sell close to 1 million acres of land in Argentina. Situated in the San Juan province in the north west of Argentina, Estancia Punta del Agua totals approximately 989,000 acres in a single location to the north west of San Juan city.
The land is being marketed through Savills and joint agents Gateway to South America based in Buenos Aires, on behalf of a multi-national family who have owned the land since the 1980’s and now wish to concentrate on other projects.
Ken Jones, head of international farmland for Savills says “This is probably the largest ring fenced freehold block of land to be offered for sale in the open market ever. Given the current interest in farmland from international investors, we expect the Estancia to appeal to a number of potential purchasers. With soil reports showing vast areas of silt soils, and the potential of tapping into one of the largest aquifers in Argentina, the Estancia needs an investor who understands agriculture and has the capital to invest after the purchase in a scheme of works to bring the land into line with 21st century farming techniques. We feel, once implemented, not only will the owner have one of the largest farms in the world, but also will have added value far beyond the cost of the scheme.”
Joint agent Geoffrey McRae of Gateway to South America adds; “The Estancia was a productive farming estate until the 1950’s when lack of infrastructure meant that the province of San Juan became less competitive in comparison to the more strategically located provinces like Mendoza and La Pampa. In recent years, a strategic alliance between the countries of Chile, Argentina, Uruguay and Brazil has meant significant investment in, amongst others, a road network connecting major ports on the Atlantic and Pacific oceans. Part of this network of road runs the full width of the Estancia meaning produce can be transported from the land with ease. Investment in the 132kv grid network means that the Estancia will also benefit from a modern, reliable electricity supply.”
The Estancia totals approximately 989,000 acres and is available as a whole by Private Treaty.
Source: http://www.landgazette.co.uk/index.php/rural-agency-/935-largest-block
The land is being marketed through Savills and joint agents Gateway to South America based in Buenos Aires, on behalf of a multi-national family who have owned the land since the 1980’s and now wish to concentrate on other projects.
Ken Jones, head of international farmland for Savills says “This is probably the largest ring fenced freehold block of land to be offered for sale in the open market ever. Given the current interest in farmland from international investors, we expect the Estancia to appeal to a number of potential purchasers. With soil reports showing vast areas of silt soils, and the potential of tapping into one of the largest aquifers in Argentina, the Estancia needs an investor who understands agriculture and has the capital to invest after the purchase in a scheme of works to bring the land into line with 21st century farming techniques. We feel, once implemented, not only will the owner have one of the largest farms in the world, but also will have added value far beyond the cost of the scheme.”
Joint agent Geoffrey McRae of Gateway to South America adds; “The Estancia was a productive farming estate until the 1950’s when lack of infrastructure meant that the province of San Juan became less competitive in comparison to the more strategically located provinces like Mendoza and La Pampa. In recent years, a strategic alliance between the countries of Chile, Argentina, Uruguay and Brazil has meant significant investment in, amongst others, a road network connecting major ports on the Atlantic and Pacific oceans. Part of this network of road runs the full width of the Estancia meaning produce can be transported from the land with ease. Investment in the 132kv grid network means that the Estancia will also benefit from a modern, reliable electricity supply.”
The Estancia totals approximately 989,000 acres and is available as a whole by Private Treaty.
Source: http://www.landgazette.co.uk/index.php/rural-agency-/935-largest-block
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