Numerous investors have declared their bullishness on farmland over the past year.The latest is Michael Burry, who made a mint betting against housing.
The bet seems based on two ideas:
One is that food demand (well, meat demand, leading to grain demand) is going to explode in the developing world, making farmland much more valuable. Of course, this is the theme behind BHP’s bid for Potash.
Also, farmland is probably the best anti-apocalypse, anti-hyperinflation bet you can buy. Better than gold, probably. So with memories of the crisis lingering, the appeal of this kind of bet remains.
Of course, cash-flush investors coming into the developing world (Africa, and elsewhere) with the intent to buy and speculate on land is bound to cause problems.
It’s the subject of the latest Ambrose Evans-Pritchard column in the Telegraph today. He argues that the backlash has already begun.
So far the backlash is actually fairly minimal though. Pritchard is light on examples. Some investors are teaming up with domestic players to avoid government retribution (though of course, Western investors teaming up with domestic companies is common in any market, in any country).
Still this is something to watch, for sure, especially if investors start cashing in, or if more countries experience food shortages, and feel they’re paying out the nose to speculators in order to feed their populations.
Along these lines, definitely read this post from Josh Brown at The Reformed Broker on ideas for playing the ag boom if you’re not exactly in a position to be buying land.
Don’t miss: 10 companies BHP could buy instead of Potash >
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