Healthy soil and sustainable growing

["TradingPostPaul" <tradingpost@riseup.net>]

Great. All we need is higher farmland prices.

CORN FARMS REPLACE NEW YORK LOFTS AS HOTTEST PROPERTY 
By Jeff Wilson Bloomberg
February 20, 2007

Farmland from Iowa to Argentina is rising faster in price than apartments
in Manhattan and London for the first time in 30 years.

Demand for corn used in ethanol increased the value of crop land 16% in
Indiana and 35% in Idaho in 2006, government figures show. The price of a
Soho loft appreciated only 12%, while a pied-a-terre in Islington near
London's financial district gained 11%, according to realtors.

Farmland returns ``will take a quantum leap over the next 18 months,''
after corn prices surged to a ten-year high in February, said Murray Wise,
the 58-year-old chairman and chief executive officer of Westchester Group
Inc. in Champaign, Illinois, who oversees $460 million of land investments.

Wise, who was born on a Canadian farm and now manages 85,000 acres, said
prices in the U.S. Midwest may gain 12% a year through 2017. Farmland rose
in value in 34 of the last 37 years, according to data compiled by
UBSAgriVest, a unit of UBS AG, the world's biggest money manager. The
returns are attracting hedge funds and investment brokers.

Hancock Agricultural Investment Group in Boston purchased $100 million of
farmland in the past year, increasing its holdings by 13% to $865 million.
Macquarie Bank Ltd., Australia's largest securities firm, plans to spend as
much as A$1 billion ($775 million) on ranches in Australia for a new
agricultural fund.

Pergam Finance, a Paris-based investment company with $1 billion in assets,
two years ago started Campos Orientales, a fund that buys farmland in
Argentina and Uruguay. The company formed a venture with Bellamar
Estancias, owned by Argentina's Hirsch family, that manages 120,000
hectares and plans to raise $70 million for farmland acquisitions.

In Queensland, Australia's biggest cattle-grazing state, land rose by about
ten percent to between A$500 ($394) and A$550 an acre in 2006, said Dick
Allpass, a rural property consultant at Adelaide-based Elders Australia
Ltd.

Orders for food and feedstock from China in the last five years helped
boost prime Australian farmland by as much as 300%, said Wayne Carlson,
general manager for agribusiness at Melbourne-based National Australia Bank
Ltd., the nation's largest lender. ``That rise of the last few years is
what has made some of these fund managers and investment groups say, `Why
hell, why aren't we in this?''' Carlson said.

Average U.S. farm prices increased by 15% in 2006, Agriculture Department
data show. The cost of buying corn farms in Argentina, the world's
second-largest exporter of the grain, jumped 27%, according to Buenos Aires
industry newsletter Margenes Agropecuarios.

Marc Faber, a Hong Kong-based investor who manages about $300 million, says
one of his favorite stocks is Cresud SA, a landowner in Argentina's Pampas
region. The shares jumped 63% last year. Farmland is ``very inexpensive in
a world of inflated asset prices,'' he said in an interview February 4 from
Bermuda.

The demand for corn used in ethanol got a boost from U.S. President George
W. Bush last month, when he urged a fivefold increase in renewable fuels by
2017. To meet Bush's goal, 12.5 billion bushels of corn would be needed,
19% more than was harvested last year in the U.S., the world's biggest
producer.

``It is not the investor that is pushing up land prices, it is the surge in
corn prices from ethanol demand,'' said Jim Farrell, chief executive
officer at Farmers National Co. in Omaha, which manages almost 1.2 million
acres of farmland on 3,700 farms. ``Midwest farmland is predicated by the
strength or weakness of corn prices.''

Corn futures have jumped 82% on the Chicago Board of Trade in the past
year. They gained 0.6 percent to $4.32 a bushel in electronic trading as of
3:43 a.m. local time

The rally is helped by a reduction in the number of acres available for
planting. About five million to eight million hectares of the world's total
of 1.5 billion (3.7 billion acres) of farmland goes fallow each year
because of deteriorating quality, according to the Worldwatch Institute in
Washington, which does research on food production. Crop land also is lost
because of development and lack of irrigation, the institute said.

``Ethanol is not the only story here --- it is just the one getting
headlines,'' said Jeff Conrad, 45, president and managing director for
Hancock Agricultural, a unit of Manulife Financial Corp. ``The supply side
is the big unknown because we know demand is rising.'' Conrad manages
126,000 acres in the U.S. and 7,000 acres of wine grapes and macadamia nuts
in Australia.

U.S. farmland declined by 9.6 million acres, or 2.8 percent, in the two
decades ending in 2001, according to the most recent data available from
the government.

Jim Rogers, the hedge fund manager who predicted the start of the commodity
rally in 1999, said global warming will hinder crops and has advised
purchasing farmland for at least a decade. ``Because of the disruptions,
agricultural prices will go through the roof,'' he told reporters in
Melbourne on February 7. ``I am extremely bullish on agriculture.'' To be
sure, farmland has seen rallies before that were halted by surging interest
rates or plunging commodity prices.

In the three years ending in 1975, prices rose more than 30% annually in
Iowa, when the cost of fuel surged during the 1973 Arab oil embargo and the
former Soviet Union bought record amounts of U.S. corn and wheat to make up
for domestic crop losses. U.S. farmers bought more land with borrowed
money. Iowa farmland more than tripled from $482 an acre in 1972 to $2,147
in 1981. After the Federal Reserve boosted interest to 20% in 1980 and
again in 1981 to curb inflation, farmland prices plunged more than 60% from
1981 to 1986.

``Sharp interest-rate increases are a risk to farmland appreciation'' by
boosting the value of the dollar and hurting U.S. crop exports, Conrad
said. ``A sustained drop in crude-oil prices would take the shine off the
ethanol market,'' he said.

``Farmland prices are dependent on commodity prices, which are incredibly
volatile,'' said Liam Bailey, head of research at Knight Frank LLP, a real
estate agent in London that handles about 25% of U.K. farmland sales. ``You
have to be prepared to ride the ups and downs. You could see a massive
reversal in prices.''

Returns from farmland have averaged 10.9 percent annually the last 15
years, the National Council of Real Estate Investment Fiduciaries in
Chicago said. The Standard & Poor's 500 Index of stocks has risen 10.7
percent each year, while the return from the Lehman Government Bond Index
was 6.3 percent.

Home prices fell in half of the cities in the U.S. last quarter, the
National Association of Realtors said last week. Prices in 70 U.S. cities
including Las Vegas and Washington may drop ten percent or more between now
and 2009 on higher borrowing costs, according to a study by Economy.com, a
unit of Moody's Corp.

Land in Iowa, the biggest U.S. producer of corn and home to the most
ethanol plants, surpassed $5,000 an acre from a high of $4,200 a year ago,
said Monty Meusch, 55, a vice president for Farmers National Co., a
property broker and farmland manager in Omaha, Nebraska. A 200-acre Iowa
farm increased 14% in a month when it sold for $5,700 an acre in October,
he said.

In Manhattan, the average apartment increased by 3.2 percent last year, the
smallest gain in a decade, to $1.22 million, estimates Miller Samuel Inc.,
the borough's largest appraiser. While asking prices soared 62% in London's
Kensington and Chelsea neighborhoods, the rise in actual sales prices was
16% last year to 677,318 pounds ($1.32 million), according to Land Registry
and realtor data. ``Three years ago people were skeptical about investing
in farmland,'' said Olivier Combastet, founder of Pergam. ``It's become
much more sexy.''

He anticipates annual returns of 15% in the next five years from his South
American land investments.