Looming food crisis 2010

[hayekvindicated]

http://www.marketskeptics.com/2009/1...r-dummies.html

Im looking to buy farmland in Canada or India (India because Im Indian and have contacts there). Canada because land is cheaper than anywhere in Europe by a big margin and I also have friends in Canada. The US is ruled out for me as Canada works out to be about 50-70 percent cheaper.

Please feel free to comment.

Some more questions

(1) Is farmland the best way to play the coming bull market in agriculture?

(2) should one play it through the futures market rather than through a hard asset like farmland?

(3) are there better stock market plays than both (1) and (2) above?

(4) are etfs a better play than futures?

(5) are there any other plays on agriculture that may be better than all of the above?

[Jay]

Re: Looming food crisis 2010

http://www.marketskeptics.com/2009/1...r-dummies.html

Im looking to buy farmland in Canada or India (India because Im Indian and have contacts there). Canada because land is cheaper than anywhere in Europe by a big margin and I also have friends in Canada. The US is ruled out for me as Canada works out to be about 50-70 percent cheaper.

Please feel free to comment.

Some more questions

(1) Is farmland the best way to play the coming bull market in agriculture?

(2) should one play it through the futures market rather than through a hard asset like farmland?

(3) are there better stock market plays than both (1) and (2) above?

(4) are etfs a better play than futures?

(5) are there any other plays on agriculture that may be better than all of the above?

It looks like the best way to play the coming market is to buy farmland and plant trees. ;)

Remember that farming is oil intensive and you will be competing against large vested interests. I think it is doable, but difficult, especially for the agriculture illiterate.

[Chris]

Re: Looming food crisis 2010

HayekV, I am thinking about doing this in Europe, mainly due to having family here. The land is not nearly as cheap as Canada but there is a lot more sunshine.

A couple of points;

• land is likely to be taxed highly by governments starved of tax income.
• Farming is hard work and has the potential to be greatly unprofitable.
• The learning curve is steep.
• Finance will be hard to come by in the next decade (at least).

Will this become your primary income?

[hayekvindicated]

Re: Looming food crisis 2010

It looks like the best way to play the coming market is to buy farmland and plant trees. ;)

Remember that farming is oil intensive and you will be competing against large vested interests. I think it is doable, but difficult, especially for the agriculture illiterate.

Good point, Jay. In Canada, your comment would certainly apply. In India, however, I would be considered a "farmer with large land holdings". Average farm sizes in India are tiny. There are two other advantages of buying land in India; (1) labour is a lot cheaper than in Canada; (2) farm income is not subject to income or capital gains tax. All the money you make is totally tax free. Im tempted to buy a couple of hundred acres and put it under cultivation.

Right now Im only in the "sourcing" stage. I will look at the prices, consider all the costs and benefits and then make a decision.

I am convinced, however, that playing the futures market is not the way to go and ETFs are another complicated financial product with 300 page prospectuses which doesn't interest me (as Marc Faber says - the better the product, the smaller the prospectus).

[hayekvindicated]

Re: Looming food crisis 2010

HayekV, I am thinking about doing this in Europe, mainly due to having family here. The land is not nearly as cheap as Canada but there is a lot more sunshine.

A couple of points;

• land is likely to be taxed highly by governments starved of tax income.
• Farming is hard work and has the potential to be greatly unprofitable.
• The learning curve is steep.
• Finance will be hard to come by in the next decade (at least).

Will this become your primary income?

Chris, no this won't be my primary source of income. I have just got my hands on some more cash and need to do something with it. Agriculture is an area where Ive had an interest for a while and Im looking to get involved.

You've made excellent points:

(1) true but not in India, see above.
(2) True again but if I could get cheap farm labour in India, that can get around the problem somewhat.
(3) Agreed. I will not fool myself that its child's play. However, I have friends who are farmers in India and also in Canada (and that isn't their primary occupation).
(4) true again. I need to work out the costs etc. Finance may not be hard to get my hands on in India where the state run banks provide credit to the farm sector.

Another option may be to buy a farm and lease it out. That generates income annually and I have an appreciating asset. Its another possibility Ive thought about.

I also know some scientists in biotech and am in discussions to see what opportunities there are. All in the very early stages at the moment.

[ggirod]

Re: Looming food crisis 2010

If the article you linked is what is motivating your search, you might want to read this discussion from a few weeks ago:
http://itulip.com/forums/showthread.php?t=13473 The situation in the US may not be anywhere near as dire as what the author reports, so maybe it is time to rethink

Farmland is a tough investment. If it is for grain production you (or your tennant) will have lots of energy, fertilizer, and pesticide costs, not to mention ever-increasing prices for GM crops, which will be about the only ones raised by large scale farming. Volatility in prices is just an accepted part of doing business in agriculture but it will affect how your tennants can pay the rent. Also, interest on farming loans can eat up lots of profits, if inflation eventually hits interest rates.

Canada is probably a good choice because rainfall is likely to be sustained, while droughts may eventually overtake lots of the central US. Irrigation, in any case, is going to be dicey, so you will want to see how the land does sans irrigation, whether neighboring land is irrigated, and how rainfall has been holding up, variability in rainfall amounts, etc.

If you are looking at entering the farming business you probably should think again and sit down with a number of farmers before you jump. You would need deep pockets, accept significant risks every year, and a tough skin to thrive. Finally, good land is IMHO probably a better way to speculate on food than futures, etf's etc. because the funds and futures are short term and the costs for food will rise, like inflation, cumulatively and long term.

On the downside, by the time you figure in ever-increasing costs for energy, fertilizer, pesticides, GM seeds, and interest on operating capital, you may find yourself in the same position as gasoline refiners. The squeeze between the rising costs of production and limited options to raise the product price means you don't make a heck of a lot. That is very possible in the new economy of limitations that seems to be evolving. Until someone corners the market on assets like farmland, I suspect the price of the land may not keep up with the value, just as most assets now are down.

[Rajiv]

Re: Looming food crisis 2010

If it is for grain production you (or your tennant) will have lots of energy, fertilizer, and pesticide costs, not to mention ever-increasing prices for GM crops, which will be about the only ones raised by large scale farming.

Not necessarily -- there are other ways of growing grains that are not resource intensive. for example - Winter Wheat in Northern Europe According to the Fukuoka-Bonfils Method

by Eric van Essche

This is a method that is modulated by the summer' and winter solstices.

The wheat seed sown into a carpet of spreading, perennial clover round the St. Jean (21/6) germinates and develops a host of deep, numerous, and prolific roots before facing the winter. It then rests, after an intense work of assimilation that is favored by the bacterial activity of the soil (N. P, Mg, K, and trace elements) and a particularly intense photosynthesis of the leaves (C) during the summer and autumn.

It is ready, once the winter is over, to flower and to develop the grain without; hindrance, so as to offer in mid-summer its heavy ears.

Plants 60 cm `apart in either direction do not waste themselves in ratricidal struggle, developing thus such heal that the wheat can come again on itself several years in succession The new sowing are made at the St. Jean in the field attaining its maturity.

This balanced system can yield more than 10,000 kg each year. We are going to see how it employs to the best the potential residing in the chain of transformation that goes from the mineral uptake to its being put at the service of man and/or animal, passing by way of a mineral restitution and an increasing enrichment of the soil by microorganisms and earthworms.

We shall attempt to follow the complete cycle, bearing in mind three points that constitute its originality: early - open - surface sowing, without working the soil.

Respect the living work of the soil.
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At the winter's end, the wheat, which has under gone hardening is going to be able to initiate its flowering. It then lives on the reserves accumulated the previous year. This is necessary in the spring, for the bacterial activity of the still cold soil is limited and does not assure sufficient nourishment. The yield of the cultivation will be a function of several factors:

• - the number of plants per unit area
• - the number of ears per plant
• - the number of earlets per ear
• - the number of grains per earlet
• - the unit weight of the grain

It can be seen from the following table how in nature agriculture one influences these elements in comparison to conventional methods:

Method	Conventional	Natural
Plants/m2	350	3-4 : 1,5-2
Ears/plant	0-3	100-150
Earlets/ear	12-15	35
Grains/earlet	1-3	7
Grains/ear	20-30	40-6-
Weight of grain	Low unit weight	High unit weight

The number of ears per plant, depends above all on the side-shooting which is encouraged by open, early sowing.


The number of earlets depends upon the floral initiation and the subsequent stages as well as upon other factors.

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[Southernguy]

Re: Looming food crisis 2010

HV: One principle of investing, at least in my own experience is buy cheap.
Once you bought cheap, profit is sure.
I´dont think farmland is cheap, by historic standards, nowhere in the world.
Of course it is possible that in the future prices keep going up, and today´s shall be seen as "very cheap".
But, aside from sofisticated analyisis, always that´s expensive has become cheap, and viceversa.
I hold a small farm in which I do meat cattle growingn, here in South America. And I don´t live from it, though I make some money.
Made my best business in life buying when it was very, very cheap (land, of course) and selling some time ago.
I don´t expect ever to do such a good business. but, right now, I´m not looking for land to buy.

[dummass]

Re: Looming food crisis 2010

It looks like the best way to play the coming market is to buy farmland and plant trees. ;)

Remember that farming is oil intensive and you will be competing against large vested interests. I think it is doable, but difficult, especially for the agriculture illiterate.

I agree that modern farming practices are oil intensive. Traditional farming, on the other hand, is not. As the peak cheap oil prognosis gains momentum, modern farming practices will become less competitive with the traditional ones.

Farm land, from a historical context, has been an excellent store of value. The problem with making an investment in farm land, these days, is the debt load required to carry it. You will need to squeeze every ounce of productivity from the land to cash flow the debt, which is not sustainable for the land, long term.

There are places in the world that do not finance farm land. They probably represent a better value. Things are changing fast, however, as FIRE gets it's hooks into everything. For example, Brazil offers an excellent climate with plenty of water and land is rarely purchased with debt. Good values do exist, but you need to work hard to find them.

Level ground (especially valley bottoms) with excellent soil fertility and good water sources are important factors to consider when making a purchase. Likewise, you will want to be close to market as transport will become more expensive in the future. Good luck


P.S.: Since writing my post, I noticed several replies have touched on the same topics. Please forgive any duplications in my response.

Southernguy, if you don't mind me asking: where is your farm?

[thriftyandboringinohio]

Re: Looming food crisis 2010

http://www.marketskeptics.com/2009/1...r-dummies.html

Im looking to buy farmland in Canada or India (India because Im Indian and have contacts there). Canada because land is cheaper than anywhere in Europe by a big margin and I also have friends in Canada. The US is ruled out for me as Canada works out to be about 50-70 percent cheaper.

Please feel free to comment.

Some more questions

(1) Is farmland the best way to play the coming bull market in agriculture?

(2) should one play it through the futures market rather than through a hard asset like farmland?

(3) are there better stock market plays than both (1) and (2) above?

(4) are etfs a better play than futures?

(5) are there any other plays on agriculture that may be better than all of the above?

Some years ago a small farmer won the state lottery. A TV news crew went to the old farmer and asked him what he would do with all the money.

"Oh", said the old farmer, "I suppose I'll just keep farming until it's gone."

[GRG55]

Re: Looming food crisis 2010

The land is not nearly as cheap as Canada but there is a lot more sunshine...

Actually that depends a great deal on where you are in Canada and where you are in Europe. Where I am building the bunker gets a whole lot more sunshine [2400 hours annually] than most of Holland, Belgium, Northern Germany, or even Paris [1700 hours].

On the other hand, where I grew up in Canada [Vancouver] while similar in annual hours of sunshine to Lille or Strasbourg [roughly 1600 hours annually] can't compare with Nice [2700 hours] or Florence [2500 hours]...

Of course the temperature here this morning is minus 16 deg C, which makes it difficult on the lettuce...but we are hopeful that the mighty Monsanto will soon create genetically modified seeds tailored for sub-zero farmers...

[ggirod]

Re: Looming food crisis 2010

Not necessarily -- there are other ways of growing grains that are not resource intensive. for example - Winter Wheat in Northern Europe According to the Fukuoka-Bonfils Method

That looks really interesting. I wonder how much it is used in North America and how long it takes to get the soil into condition to sustain organic winter wheat.

[strittmatter]

Re: Looming food crisis 2010

Some years ago a small farmer won the state lottery. A TV news crew went to the old farmer and asked him what he would do with all the money.

"Oh", said the old farmer, "I suppose I'll just keep farming until it's gone."

The following was an actual conversation among two of my farming buddies in my local community a few years ago:

Haven't seen you around in a few days, where you been?

Jury duty.

You tellin me you weren't smart enough to get out of jury duty?

They paid us $12.00 a day. Compared to farming, hell, I considered it good money!

[Rajiv]

Re: Looming food crisis 2010

I haven't read the "Harmonious Wheatsmith" just yet.

Also this ramble on it - 'The Harmonious Wheatsmith'

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...in a article written by David Holmgren in 1991
Development of the Permaculture Concept.
There is a reference to Clever Clover in the Natural Farming section (page 4-5)

Attempts to apply his [Fukuoka] methods have not necessarily been successful because any sustainable system is context and site specific. However, farmers inspired by Fukuoka or working independently have developed similar methods to produce organic and biodynamic grain. The techniques of growing grains and legumes together, over sowing of crops with no intervening cultivation or use of herbicide, and appropriate use of flooding and animals for weed control are now accepted in agriculture as at least possible. Recent research work by C.S.I.R.O. on vegetable growing using living mulches and green manure crops (including Clever Clover) without cultivation reflect as least the conceptual influence of Fukuoka's work.

Perhaps the most universal aspects of Fukuoka's work, the learning from nature, remains the most difficult for people to adopt and without that no amount of technical information on permaculture will lead to sustainable systems.

then back to the 2000's where I found a similar observation to David Holmgren's about the value of observing nature.

In a Science Show discussion panel, with the subject of the 'Serendipity in Science', Clever Clover and its originator Richard Stursacre are used to illustrate observation and serendipity.

Panel Transcript
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[thriftyandboringinohio]

Re: Looming food crisis 2010

The following was an actual conversation among two of my farming buddies in my local community a few years ago:

Haven't seen you around in a few days, where you been?

Jury duty.

You tellin me you weren't smart enough to get out of jury duty?

They paid us $12.00 a day. Compared to farming, hell, I considered it good money!

Good one.

But more seriously to the original point by Hayekvindicated, it seems to me that making money by directly farming is the ultimate mature industry. Only a well-managed operation running at a large scale makes good profit, and the business is capital intensive, requiring large up-front expenditures for land, equipment and buildings, and then big cash infusions each season for planting and havest costs. I found a USDA report that says if you run your 1,200 acre wheat farm expertly well, you can net about 12 bucks an acre, or $14,000 for a year of very hard work.

I would be more attracted to indirect investment in food. Buy good land adjacent to large commercial farms hoping to rent them the land. Buy stock in key input suppliers like Monsanto, Dow, Kibota, Mahindra. Buy stock in food processors like General Mills, Kraft or ADM.