Bubble Trouble in the U.S. Heartland?

The “smart money” has been buying up farmland hand over fist for the past few years and you can see how they helped drive up land prices in the U.S. heartland. Some think this is the place to be if the shit really hits the fan. Not gold, but productive assets that you can eat. Nevertheless, with ag commodities starting to rollover, farmland prices have probably seen their best days.

By Global Macro Monitor

The “smart money” has been buying up farmland hand over fist for the past few years and you can see how they helped drive up land prices in the U.S. heartland. Some think this is the place to be if the shit really hits the fan. Not gold, but productive assets that you can eat.

Remember the Jan. ’09 NY Magazine piece of the U.S. hedge fund manager entertaining buying a zodiac and “putting it in storage unit on the West Side, so he could get off the island quickly” in the event of a total financial collapse and social breakdown? Same concept.

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On a similar topic, see here for an interesting Telegraph article on how the British military is concerned about the potential collapse of the Euro. The Telegraph writes,

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The military planning work has come to light after The Daily Telegraph disclosed last month that British embassies in the eurozone have been told to prepare emergency plans for the demise of the euro and the possible civil disorder that could follow.

Nevertheless, with ag commodities starting to rollover, farmland prices have probably seen their best days. The Wall Street Journal reports,

The Federal Reserve issued a memo to farm bankers in late October warning that the market for cropland “may reflect overly optimistic long-term expectations” and that land values would fall if interest rates increase abruptly and farm profits shrink.

The sharks smell blood and no doubt the hunt for overly exposed farm banks is on.

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3 Comments
  1. John Haskell says

    I’m glad that I am provided with a chart of price in inflation adjusted dollars.  I don’t need any chart of price/ cash flow or any information about changes in financing conditions.  Thanks.

  2. Aaron Krowne says

    I’m a fan as much as anyone of valuing cash-flowing assets on cap rate, but don’t you think it’s odd that the Fed bases its warning in large part on the probability that interest rates will rise — when they themselves are preventing that from happening (and show no signs of letting up)?

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