30
12/09
It Can’t Happen Here? Oh Yes, It Can…
By John Galt
December 30, 2009
NY investment firm gaga for green acres
Optima Fund Management aims to profit from the rise in commodities prices with its intention of purchasing 10,000 acres of agricultural land in Arizona and California.
Now read that headline from the December 29th edition of Crain’s NY Business and think for a minute. Then get excited.
Why get excited? The introduction of hedge funds into the agriculture arene within the United States domestic market is a very dangerous break from the past. Instead of the proverbial “Family Farm” model performing its historic function of growing crops, going to market and repeating the cycle, now hedge funds will have the ability to determine what is grown and which markets those products are sold to. Thus if a corn farmer in Kentucky agrees to sell his land to XYZ Hedge Fund, then they determine that soybeans will be the most profitable path and those crops are to be sold on the Chinese or Indian markets, that’s no longer product available for domestic consumption. In the end we could have to bid an even higher price due to our deteriorating dollar against foreign competition to insure a steady supply of food, thus losing our advantages of historically cheap domestic agricultural supply. It also introduces the risk of land mismanagement although the returns should be sufficient if the funds follow the advice of the farmer/sharecropper occupying the land.
If you extend this out, it is not a big deal; or is it? China and India already have private corporations engaged in leasing farms throughout Asia to grow and export food to their domestic markets. It is perfectly logical for them to do the same within the United States as a follow up to their other international ventures. The problem people will have is that as domestic price pressures intensify in 2010 and beyond, especially for necessities like food, then the specter or protectionism will rear its ugly head and that will be the final nail in our economic coffin. This is not a warning that bad things could happen from this, but in my opinion when non-farming interests begin to view the American farmer, especially non-corporatized entities, as profit centers the long term future for the independent American family farm looks bleaker by the minute.
Pickdog
30.12.09
13:18
A very bad sign.
personofnocolor
30.12.09
16:16
“the long term future for the independent American family farm looks bleaker by the minute”
The family farm is already gone–starting almost thirty years ago. Remember “the farm crisis” of the early eighties? Willy Nelson’s Farm Aid? Mellencamp’s ‘Rain on the Scarecrow’? It wasn’t exactly hedge fund farming, but it has been a major trend toward corporate farming. The number of ‘families’ involved has shrunk by an order of magnitude and any remaining are either much larger than the previous norm or are just ‘hobby farms.’
I do agree it’s worthy of our ongoing attention: this could be the start of a whole new level of evil. ADM, Monsanto, and Con Agra are one thing; Wall Street hedge funds are quite another.
Desertrat
30.12.09
18:27
Seems to me that profitability would be a major problem for US lands, particularly when compared to farmlands in other countries. With prime farmland here at $2,000 and acre and up, the much cheaper lands in South America and Africa might well be better deals. China is already moving into Africa, e.g.
US farmers might well be cautious about changing from one crop to another. Many have already been burned by the gasahol/corn losses.
‘Rat
db51
30.12.09
19:32
I read this article this morning. Find it interesting that after hosing all the investors in their hedge funds, they are now going to hose their investors by buying in at what may be the top of the land market.
I probably spent 20 years traveling around the Delta looking at land, and the best deals I found were usually those which were purchased by Insurance Companies or other Wall Street Banksters who ended up putting them up for sale at a fraction of their cost. And that was usually after flume channels, lift stations, levies, and grain storage was built. In short they got hosed.
These scheisters now can show their suckers what a great asset farmland is, since it has not cratered like the rest of the investments they have sold to the schmucks. They will suck these people in, they always do come in at the top, they are notorious for making bad investment decisions when it comes to farming.
Bernie Ebbers got hosed on Angalina in Louisiana and farms in Canada, Pilgrims Pride got hosed on their farm North of Texarkana, and a big insurance company got hosed on a farm called Molicy, in North Louisiana, and Oil company execs got hosed on Cane River north of Alexandria, Louisiana, all of them had the idea that farming was where you go to protect your wealth. The problem was they bought in at the top, and held no vested interest in the operations other than generating commissions.
Look at Premium Standard Farms in Missouri, who sucked in the TIAA Pension plans and the Jews in New York to build that operation in North Missouri, they went bust, but it was great while it lasted. It took Cargill to salvage that operation for pennies on the dollar.
I am not worried about the Hedgefunds being in the game for long, for some reason they were not around 20 years ago, when Grundy County land here in Iowa was offered to me at $900 an acre, or the large tract offered me in Mower County Minnesota, or the big tract in Illinois for the same price.
The time to buy land is when it has collapsed, not when it is topping out. Too me this would be a great time to sell, if people wanted out, because when the Wall Street Banksters believe buying farmland is a great idea it is time to get out, and buy back in a few years at a lower price.
John.
koios
30.12.09
20:50
Any farmer who has debt is asked to buy crop insurance by his lender. This year has seen record claims from the Dakotas to Mississippi to California. Sure, the USDA guarantees the insurance, but what happens if poor weather persists the next 2-3 years and the USG goes into default? From what I understand, several of these insurers are already headed into bankruptcy. You’d have the hedge funds going hat in hand to Helicopter Ben begging for we middle class suckers to bail them out. Again.
Wynboniface
30.12.09
20:57
I thought Monsanto had already killed the family farm. Maybe this will kill Monsanto. I agree with you that this is bad.
Alsayyid
30.12.09
21:15
Love it, we here in America will soon feel the pain of cash crop starvation, much like the rest of the third world has known for over a century. Western imperialistic economic powers have been doing this for years to the people of many a country….grow this crop and reap mean profits when your crop is sold oversea, while the domestic price for food doubles and trebles cause no one grows it. Hell the price we are about to pay, is beyond the conception of most.
BilboMiami
31.12.09
03:35
They know that the only thing with any value, after they destroy our country, will be farm land, not gold, not silver. The gold you buy is not there, just like if everyone went to the bank to get their money, it’s not there, they are selling the same gold to everyone. Be aware. The chinese need to use the useless dollars they have to buy our land.
Fight On
31.12.09
16:02
Egad!
Having these hedge funds owning land in California is like having Kerberos as your family pet.
Are they banned from writing default swaps and derivatives on ag futures?
Fight On
31.12.09
16:04
@Bilbomiami-
We “buy” our water from their water district.
We “buy” our gasoline from their gas company.
We “buy” our electricity from the power company.
We then pay more taxes for them to “buy” more control?
The next thing you know, we’ll be buying air to breathe from them also.
Burrow Owl
01.01.10
07:03
“The next thing you know, we’ll be buying air to breathe from them also.”
Shhh…. don’t give ‘them’ any ideas.
I wonder if this has anything to do with the fact that I’ve been inundated with offers over the past few months to buy farm/timberland that I own in Oregon? (Guaranteed cash! Get your money in 30-60 days!!) I’ve owned this land for more than 20 years- and, although I have received offers from speculators and the occasional private party looking for a retreat property in the past, they have been few and far between. Over the last 6-8 mos., however, these letters have been arriving on an almost weekly basis.
Things that make you go hmmm……..
Spork ‘em. I have no intention of selling.
In anticipation of my coming retirement in a couple of months, I invested considerable time and expense last fall in resurrecting long fallow fields…and I’ve been managing the timber since day one.
BilboMiami
01.01.10
20:57
Fight On-
They will take everything from us, and the sheeple will agree just to keep their plasmas, their fancy clothes and their cars. I’ve already seen this happen, this is my second and LAST, first one in Cuba.
SoCalGal
01.01.10
20:57
250,000 acres of California ag land idled in the Valley due to water shut-off. Soon to be more. Ask Arnold if there’s any connection to Optima Fund.
Fight On
03.01.10
01:34
@SoCalGal -
http://www.votesmart.org/finance.php?can_id=29556
This website gives a listing by sector of the political contributions to Arnold S. Gov of California.
Note the size of the “uncoded” line. I guess it’s undesirable disclosure where $30,000,000.00 came from.
Do we citizens get to have an “undisclosed” location for our income and expenses also?