Someday hopefully all farming in the country will be done this way. It is amazing how animals actually help farmland become more productive, but it just makes sense when you think about how the natural environment itself actually works, with plants and animals working together.
This does sound like where we want everything to go.
As a trader, my question is always, "is this a decent time to make this trade?" (Am I about to say "there is no Santa Claus?" Hmm…)
I took a timeseries from the Kansas City Fed on change in farmland values year over year, and plotted it against the %change in the Case Shiller 10 RSA, just to get a sense. Home prices did a lot better during the bubble years, but boy, did farmland do well after the pop. It rose, while home prices shrank.
But percent change charts are always a little bit funky to understand. How does farmland compare to home prices right now? To do this, I constructed an index that starts in 1980 with a value of 100, and then I multiplied each quarter's value by the % change year over year. Its not 100% accurate because of initial value issues, but its pretty close.
Farmland does not look cheap.
My guess is, Big Money already spotted the opportunity three years ago - a couple of years after our guest did. What looked to be an awesome deal in 2008 (certainly better than buying houses) looks to be substantially less of a good deal at today's index price.
Buying farmland through this REIT is probably much better than buying conventional farmland, given the improvement in the land itself over time - almost guaranteed growth of 100% in value. But looking at the timing of farmland pricing overall, farmland right now looks overpriced. And notice how the Farmland Index line is looking a bit like the Case Shiller line from around 2006.
So I am torn. This seems like a good plan to me, and it will probably hold its value much better than conventional farmland over time, and the project overall is nicely aligned with what our values are here, and the whole plan will only do better over time as inputs become more expensive - but it seems like the timing in the property price cycle could be better. The chart suggests we're buying at the top.
And this actually makes sense. People everywhere are reaching for yield, and so a lot of money has managed to find its way into farmland - conventional farmland - along with everything else.
There is a nifty "lottery ticket" element here if inputs really rise in price. And if you think of this as a really long term investment that avoids the whole issue of bank runs, defaults, etc, and gets your money more or less off the grid, you can hopefully wake up in 10 years and find yourself having preserved your wealth rather than losing it somewhere else. As long as you don't look too closely at farmland values between now and then, I think it will turn out all right.
Just some thoughts from your friendly chart guy.