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Guest Post: The Smartest Investment Of The Decade
Via Simon Black of Sovereign Man blog,
Here’s something crazy to think about.
Roughly 200,000 people were born today. That’s net world population growth, births minus deaths.
Each one of them constitutes a new mouth to feed. And when they come of age, those 200,000 people will consume, conservatively, about 1,250 Calories per day. Collectively, that’s 91.25 billion Calories per year for the entire 200,000 people that were born today.
Where will they get that food from?
Consider that a cup of rice contains about 300 Calories. An average annual rice harvest yields about 150 bushels per acre, or about 6.7 million Calories per acre of rice grown each year.
In very simple terms, it will take 13,600 acres of cultivated, producing rice land to generate the necessary Calories to feed the 200,000 people that were born today. That’s roughly the size of Manhattan.
Tomorrow, another 13,600 acres will be required to feed the people born tomorrow. And the next day. And the day after that.
This is a conservative estimate. Obviously people eat other things besides rice. Corn has an even lower caloric yield per acre. And as people move up the food chain into dairies and meats, the amount of Calories per acre takes a huge nosedive.
Across Asia in particular, hundreds of millions of people are now being lifted out of abject poverty and into the middle class. As I’ve traveled around the world to more than 100 countries, I’ve seen this with my own eyes– people having disposable income for the first time ever.
As people’s individual wealth levels increase, their dietary habits tend to change as well. Suddenly they start consuming more expensive foods… ‘luxury’ foods like beef. And by comparison, beef yields only about 1.1 million Calories per acre.
Simultaneous to the rapid increase in demand for food, the world is also experiencing a declining trend in supply. Water shortages, loss of topsoil, weather disasters, land development, and insane government policy are all contributing to tightening food supplies.
Perhaps most importantly, though, is the effect of monetary policy. Central bankers around the world continue to print more money. That’s all they know how to do, as if the path to prosperity is paved with paper currency conjured out of thin air.
All of those trillions of dollars, euros, yen, and renminbi end up somewhere… and such monetary inflation has been a huge force in driving up food prices. In fact, just over the last few years, we’ve seen record prices from corn to wheat to sugar to ground beef to milk.
Increasing demand. Tightening supply. Destructive policy. All of these point to a long-term trend in food. And the trend is enormous. The best case scenario is steep food prices. The worst case scenario is severe shortages.
This makes agriculture probably THE place to be over the next ten years, perhaps seconded only by shorting major currencies like the dollar, euro, and yen.
There are a number of ways to invest in agriculture… ETFs, futures, food production companies, agriculture equipment companies, food technology companies, etc. But in my view, there is no better way to make a long-term agricultural investment than owning high quality, productive land.
Like owning physical gold, farmland gives you not only the financial upside of rising agricultural prices, but also the personal assurance of a guaranteed food supply.
Later this week, I’d like to discuss different places in the world where it makes sense to own farmland. Some of my recommendations may surprise you.
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Where do I store it?... In a vault?...
Just buy shares in the Farmland ETF (FCKME) --- much easier.
I think on the bottom of a lake would be good.
Excellent ~ cause that's where all my ex gold is too... Oh wait...
TIE Titanium metals
up 42.52 % today...
Is that a subsidiary of Weyerhauser?...
This has got to be the top tick.
What do you think will happen to consumption when food stamp aid is cut? Or even eliminated?
http://www.toledoblade.com/State/2012/11/12/Ohioans-food-stamp-aid-to-be...
What do you think will happen to farm land prices when the parasite class drops dead? Or is forced to work to eat, learning to be frugal with their own money at the grocery store?
Food stamp usage is DIRECTLY related to farm land prices. That's why they are budgeted in the Farm Bill. The highs have already been realized and we are now looking at a crash. Buy land at 22k per acre if you like...
Or is forced to work to eat, learning to be frugal with their own money at the grocery store?
That ain't likely. Not only would it be politically unpopular with VOTERS, but the businesses who can't succeed without SNAP revenues will make damn sure to keep politicians in office who'll help them keep the stores open.
Feeding the national population is a domestic security issue. Don't discount its importance.
You assume those that produce are going to continue to put up with a welfare state forever. That ain't likely.
Feeding yourself is a domestic security issue.
I assume very little. I observe, and I've read some history.
If you ever decide to get serious (I *do* assume you consider yourself "someone who produces"), you'll quit the useless whining and stop paying your taxes.
Nut up or shut up, eh?
+10
some of us will eat 'till the bannana hits us over the head.
Let us consider the beauty of recycling. Food that is! Double shit-burger with a side of compressed hair fries. The government is stingy with the ketchup packets though!
http://youtu.be/u1N6QfuIh0g
Leave it to the Japanese to attend a speech by the Yes Men and take it seriously.
http://www.youtube.com/watch?v=_RRDLzxFXjY
The food/pop meme is an old one. Jim Rogers has been flogging it on international TV for years. However, that doesn't make it wrong. But paying $15,000 per acre, when an acre produces 150 bushels of rice per year. That's very close to 3 metric tons which is about $1800 per year. My rule of thumb is your annual revenues should equal your capital investment (land & equipment cost) to make sense. Since the land isn't going anywhere maybe a couple of years is OK. But that's nearly 10 years.
Then you have to pay for labor, machinery (operating), fertilizer, insecticide, property taxes maintenance, float on a year's worth of expenses .... you'd be lucky to make a profit at all. But maybe that's good enough when 3 mos treasuires are .09%.
As for a guaranteed food source, you would barter your crop for the other foods you need (duh). But no money requried.
Most of the rice ground in this country doesn't cost anywhere near $15k/acre...
Even Rockefeller knew that the money was in the 'refineries'... Learn to brew sake...
My most recent land purchase closed at a cost of about $4800/ac.
I am not growing corn, only beans and wheat. However, judging solely by the quality of the land, I believe that this land is easly 90% or more of what top IL/IA/NB land would be.
In the current year, on the land I will have ALL year (I did some buying and selling to consolidate), I figure on two crops (I can double crop my land 3 of four years) I will get a return fo 11-15%.
Yes Virginia, you can still buy and make money on farmland.
Just NOT in the US.
200k heads needing 13.6k acres is 0.068 acres/head.
That math predicts that the existing human population of 6.97 billion should require 474 million acres.
Wikipedia has it more like 3.77 billion when you add up the annual crop lands to the fruit orchards and whatnot (http://en.wikipedia.org/wiki/Farmland)
So his math is basically off by an order of magnitude.
Whether that makes you think you'll get 10x the returns he's anticipating or whether you should ignore him is up to you.
Uh, I think you have that backwards. The effect of people unplugging would reduce commercial food demand and the price for it, initially. The problem comes when Tyson & Monsanto get ticked-off at the drop in revenue. Then. the will release their lobbyists and all small-time competition gets regulated completely out of business. Then everyone will be forced to pay the high prices and you get to either experience meatless Mondays and cat food Tuesdays or decide it's time to lock-and-load, neither of which turns out well for the small guy.
Nationalize farmland, shouted the voters.
Haha, nah if he goes Hugo Chavez on Americas' ass it will be the oil and natgas complex first.
It would be nice if the duopoly was interested in stewardship of our natural resources instead of selling out to the highest bidder, no strings attached.
Exhibit A: The Ethanol Mandate
At this point, I'd be more concerned with the average age of farmers in America which sits at 55! Were losing all the great trades too. In school I learned welding, mechanics, and wood shop. Today all these programs are going by the wayside. As a kid my Dad and I would change the oil and plugs on the car, rotate the tires, and change the brake pads. Young people today don't even know where the dip stick is! As a parent the best gift we can give our children is that of self reliance.
NOT to worry.
Global warming extends growing seasons, increases rainfall, melts the icecaps exposing more arable land...
:D
Oh wow, did you just read an interview with Mike Burry for the first time?
YAHTZEE!
The hole in the argument is the probability that property rights are about to be erased. Buy your farm land today have it redistributed to the urban peasants tomorrow.
I colud see farmland confiscation happening before Gold confiscation.
It's for the good of the nation, let Monsanto do all the farming, you can Farmville if your green thumb is itchy.
Let gubbermint get your meals for you.
After all you did'nt farm that anyway, other people made that happen.
The main reason they will come for your land before your gold is....You can't eat gold.
Terra Firma Bitchezzz.
CAG - Buy Sell or Hold?
This is actually a great question, one I expect many people will downvote you for asking.
I would say that it is probably a hold at the current point in time because of its level relative to historical values and the likelyhood of a pullback into the end of the year. I would be looking to buy somewhere around the $24.00-$25.00 range. Remember, sometimes where you enter and exit a position is more important than the underlying position.
*This should not be taken as individual investment advice in any way, shape or form. My comments above only represent my independent opinion regarding the value of CAG.
Thanks Darkness - The fact that you preface the comment with a warnning i will get down arrowed for asking a financial question bothers me.
This site is quickly sinking into a political quagmire. Wish we could stick to more financial topics - and if political finance is the topic fine, but how about real analysis versus the venom.
Africa joining the middle class--no, not in our lifetimes given the massive theft, corruption, and tribalism that dominates there.
Wait, I thought you were talking about Africa, not Detroit.
You realize that owning farmland doesn't mean you automatically have food right? You actually have to tend to the land in order for it to grow crops...
You arguement is essentially a replica of the classic Malthusian understanding of rapidly increasing population growth.
I have always been a gardener. I moved and had to start a garden from scratch. Set up a small patch about 20' x 20'. Since the topsoil in my back yard was sand I augmented it with a load of soil ($150.00) and some manure ($50.00). Since there are deer here, chicken wire fence ($35.00). Found posts in a work site dumpster (free). Seeds ($15.00) Total estimated cost for initial set up: $250.00. Quantity of tomatoes approximately 50. Cost/tomato = $4.00. Then came the horn worms, the root knot nematodes, vine borers and some kind of black colored mold. I can't garden in coastal Carolina. Sad. :(
You only got 50 tomatoes out of a 20 x 20 plot???
Holy moly dude. I have a patch of tomatoes that is 10' x 10', which is planted intensively (18" hexagonal spacing, each vine staked and all suckers trimmed to one main stem). The space is actually two raised beds, 4' x 10' each, with a 2-foot path down the middle. Each bed carries 25 vines, total 50 tomato plants. Total production this year of 300 lbs. harvested. Each fruit is roughly 1/2 lb. so that approximates 600 tomatoes. It can be done.
I'd recommended you acquire "How to Grow More Vegetables -- Than You Ever Thought Possible On Less Land Than You Can Imagine" by John Jeavons.
Jeavons is the man. While you're at it, also check out Steve Solomon, John Seymour, Carla Emery, and Suzanne Ashworth.
Sweet - I'm sure you've heard of this family http://urbanhomestead.org/ but they produce 3 tons of food annually from 1/10th of an acre.
Nice Criss, Ive planted half a dozen every year and produced pretty nice results too. Not close to yours. Seems like something was wrong with the first crop. Weird, mared, mischaped and ugly. If I wasn't on the East Coast I would almost think it was a gift from Japan.
I did a quick search, found this, might spark some other thoughts for you?
http://www.pamlico-nc.com/countrylivin/gardencalendar/index.htm
check the link for "organic gardening spray recipes" specific to your area. . .
Thanks, Cathartes!
Crisis...I also planted eggplant, peppers, cucumbers, cantelope and sunflowers (the deer ate the heads off). But thank you, too.
In a pinch, you can just wet down your old Bernanke clownbux & layer it over ogranic compost to create a worm shit farm... Your cuces will LOVE it...
aye, I know how hard it can be to adapt garden plans and habits to differing climates, being a bit of a gypsy in the past means I've had to give up certain ideas about what I'm going to harvest, heh.
containers and greenhouse type solutions can be of use while learning the new environment - good luck!
this is OLD NEWS.
Farm land prices have witness a bubble like curve thanks to all the speculative money chasing it.
Agriculture works as an investment thesis until the population starts to decline, as it inevitably must. I mean, once you grow old, well, you pass away at some point and then, well, stop eating.
Good luck trying to sell food to corpses.
Gold, on the other hand, works as an investment thesis either way. If the population declines, that means less growth, which in turn is met by more fiat money printing. And with peak gold just about here, you don't even need all that much demand, supply already becomes limited.
Although I think agriculture is a good place to be in, nothing will beat gold.
Gold > agriculture > energy > everything else.
Gold gives you no value if everyone around you is dead, but agriculture will keep you fed.
When was the last time the "INVESTMENT OF THE DECADE" written in bold letters and delivered to your desk, turned out to the the investment of the decade? Big themes are about as useful to making money as reading the front page of the WSJ. No one rings a bell at a good deal.
Didn't we debunk the Population Bomb back in the 1970s?
Yep. And since then, the quality of life has just kept on improving, with a hunger-free Africa, a pollution-reduced Asia, and delightful urban living in the cities of the western world.
Nice time to recco farmland. It is up as much as gold in the last 10 years. I live in Kansas, and some land has gone up 500-700%. A lot of people are selling it now. The farmer know it is time to sell the marginal land, and that is exactly what they are doing.
Buy at your own risk. The income returns are spotty on farmland.
Stick with what you know!!!!
Aquaculture makes sense, raising vegetables and fish(tilapia) in a system. You can incorporate worm beds for fish food and fertilizer, also grow duckweed to provide protein rich food to supplement fish food. Can be run by solar running circulation pumps.
http://youtu.be/dUDdU-Nd4I8
<iframe width="560" height="315" src="http://www.youtube.com/embed/dUDdU-Nd4I8" frameborder="0" allowfullscreen></iframe>
Can't expatriate farm land.
Some of the farmers I talk to, they realize this.
Jim Rogers talked about this a few months ago.
For the very long term, I would consider farmland in Greenalnd, with global warming and all.
Fuck 'farmland'... get 10-15 remote and semi-wooded acres and start planting.
What part of agriculture will do well? I see a major shift in understanding about what is a healthy diet. The food pyramid which says we should mostly eat grains is continuing to be shot down by superior scientific research for at least a decade now. It will be replaced by a diet of small amounts of grass fed meat and lots of vegetables. Cropping areas wont continue to be converted to ethanol production because we will eventually realise it doesnt produce enough energy on energy invested. These may undercut increased demand for grains from a higher population.
All of our actual diatary needs can be serviced by Aquaponics, so there is no real need for large over-bearing dirt farms. Every house with a backyard pool is capable of producing more than enough food for a large family. The whole thing can be set up to run off the grod with solar power.
I'd say it's the serious misunderstanding of diets like you stated that is the root cause of the issue. I stopped eating grains about 10 months ago, and since then I have cut a good amount of weight and feel better than I have ever felt in my 30's. No change in excercise habits or anything else either, just that one change in my diet. Something close to what was being called the South Beach Diet is close to to being ideal I think.
Yep, grains are highly inflammatory. A great resource is Mark's Daily Apple on the Paleo diet. It's basically lean meat, good fats, and veggies. Lift some heavy weights a couple times a week, sprint once a week, and light cardio a couple days and you will transform yourself in a hurry. Not starving or overdoing cardio for hours six days a week.
I posted also on aqua ponics. PortableFarm.com has some videos on it on their site and youtube.
Already do the lightened workout. I always thought it was ridiculous that the human body would be that inefficient at burning fat when I was younger. It took me a few years of reading to learn that it's not inefficient, it's just that the metabolism has different modes. Hey grain diets encourage a sedentary mode, and the heavy green diet encourages an active metabolism.Most people can't seem to understand this. Grain diets are good for winter or cold climates. I live in a desert, so there is no reason for that sort of diet.
I have an Aquaponics set up in the back yard. Raising Blue Tilapia and a variety of greens and tomatoes. This is the second year that it's been going, and the turn out only gets better with every new generation of Tilapia.
Healthy diet?... When you're farming 12+ hours a day you need CALORIES bitchez...
~~~
- 1 gram of fat = 9 calories
- 1 gram of carbs = 4 calories
- 1 gram of protein = 4 calories
Raise pigs & grow peanuts...
Much of grown grain supply eventually ends up as pig and cattle feed as it is much easier to grow animals in feedlots than in pastures.
I thought this website was full of farmers. What do you guys do for a living while our economy collapses around us and biflation wreaks havoc on the middle class' purchasing power? I think farmland in another developed country outside the US will be one of the best things to own compared to expecting your 9-5 to provide you with enough income to eat your whole life. I think farmers will have a better chance of survival than people who own other businesses, or work 9-5 jobs. The idea would be to remove yourself so far from our bullshit economy that it won't hurt you as much when everything collapses.
Couldn't agree more, and my land is in South America.
Ag land prices are at all time highs. This might be a sucker bet now,and the big money has already been made. Don't get me wrong, there could be more room to grow. But, there is lots of downside. If the US stops growing corn for fuel, there is huge downside to ag land. If the developing world adopts modern farming, yields will spike and ag prices will crash.
most quality land in the world is already being run under modern practices. There is little quality land left that is not.
Land prices are high in the US, but not everywhere else. Yes they could come down, but the mechanics of the market and weather say otherwise at present.
There are much better places to buy land than in the US at present.
So basically what people like that Jimmy Rogers guy who called for ppl to go to university for farming instead of finance,
There are plenty of high value crops that you can grow enough of in a 500 SqFt greenhouse to enable you to earn enough money to afford all the food you and your family will need for a year - problem is that if you try to grow them you will be busted and go to prison. The game is rigged brothers and sisters. And by the way, why in hell does ZH allow a guy like Simon Black to post articles? Is there one single good reason? This is one of the mysteries of ZH as far as I'm concerned. The other is the ZeroHedge/ABC Media connection. WTF is that about? How many of you trust ABC - on anything? So, why trust ZH? Please - inquiring minds want to know.
Why trust anyone you don't know? ZH is a FOR PROFIT site dude. It costs money to run and maintain bandwith.
I agree, Farmland is something crazy to think about.
The amount of new farmland needed to meet population growth, if any, has nothing to do with the amount of calories people consume - Income, productivity, efficiency of transport and storage, weather, just about anything except calories.
The amount of food produced worldwide is not in decline, it is increasing.
Food shortages have always existed, even when the population of the world was Adam and Eve.
Agriculture is not the place to be today; just like nuclear energy, dot com stocks, railroads, mortgage backed securities, and spec houses in Stockton California were really not the places to be today, even though they may have seemed that way at the time.
Owning farmland is nothing like owning gold.
Farmland is taxed, gold is not (necessarily)
Farmland needs labor, water, weather and luck, gold does not
Farmland can be confiscated or seized by eminent domain, gold cannot (usually)
Farmland can be occupied, gold cannot
Giving farmland to your children may involve taxation, gold not
Farming, as a business, is money losing for all but the biggest ag giants in many countries; the price of gold is pegged and is the same everywhere on any given day
Farming depends on petroleum and shipping, gold does not
Farmland is expensive and sometimes difficult to sell, gold is easy to sell and is liquid.
Farmland cannot be moved, gold can.
Later this week, I predict Mr. Black would like to discuss different places in the world where it makes sense for him to sell farmland. Some of his recommendations may not surprise you.
I own both farmland AND gold, so I can make or break your case either way, however the one that stands out as the worst is the one about it being a money losing business.
I got into it a few years ago. I am not 'big' and I am definitely making money.
The greatest appeal to me in farmland is that you can always trade crops for oil, or gold, but you can never consume either of the latter.
BTW, if you go to many places in the world and offered the locals good quality land or an equal value in gold, they would easily atke the land. For many, land is wealth, gold is useless since it does not produce a 'dividend' (crop) every year, and if you trade it for cash, you will eventually run out of said cash. With land you will never run out of food.
i see your point. I am from thailand and here people are queued up to buy gold, not farm land. different perspective I guess. nothing wrong to have both land and gold.
Not all ag land suffers from water issues, or even many of the other issues. If you buy carefully, you will do well.
Shitty article, but, as usual, great comments. Thanks to all for the links on farming, aquaculture, etc.
I've spent much of the past two weeks collecting leaves from my neighbors. They think I'm nuts, but don't argue. They rake and bag, and I haul away the bags, which will be shredded and turned into mulch, eventually to be the basis - along with good compost, a bit of lime and manure - for my backyard mulch beds.
Just got started gardening this year and grew some great tomatoes, broccoli, peppers and tobacco in pots. Small start, but I've eaten well for the past three+ months and cut my cost of smokes in half (I've been using roll your own tobacco for years).
Next season - I'm in upstate NY - most of my backyard- and about half of the front - will be a garden, along with half of one of my neighbors' back yards (doesn't think I'm nuts). Should get interesting when I start raising chickens. The town board will probably tell me I need permits or some other shit four four hens and a coop.
Around here, suburban Rochester, a few people garden, but mostly flowers. In the adjacent counties, where maybe half the land is still raw, the towns and villages have set ordinances that say you have to build on land, can't put up a trailer or a camper on a slab, even if you don't live there. It's f-cking communism, but, the one good thing is it's keeping land prices down to about $2K per acre. South of here, in the fertile "wine country" land is over $7K. Go 20-50 miles North, East or West, the price drops right off and the land is just as good for just about anything you want to grow.
Some day, people are going to get fed up with local regulations and start shooting tin-horn despots on village and town boards who don't know shit. Can't wait. My point is, I buy the land, I'll do whatever the fuck I like with it. Keep your brain-dead little paper laws off y land or be prepared for buckshot.
I'm 58, fed up with corporations and government and the great paper chase called "retirement." I intend to farm, eat and smoke whatever I want until I'm about 124 years old.
Check out thecandidadiet.com. I lost 50 pounds in a year, feel better than I have my entire life and don't take crap from anybody (not all of that due to diet and exercise). Good luck to all, and especially check out Gene Logdson, the contrary farmer.
Hoes, bitchez