Does it make any sense to 'go in the farm business' 'buy farmland'?

Discussion in 'Commodity Futures' started by Daal, Mar 28, 2008.

  1. Daal


    some bulls say that its a 'levered' way to play the ag boom. but if this 'investment' depends on prices going up wouldn't be a better idea to just increase your leverage in a basket of ag futures?Way more liquid, diversified(in case the city or crop your in has a crash), allows you to change your mind plus you dont miss any seinfeld reruns
  2. ?......yes.......yes.......ovaltine!
  3. Once they figure out that farming is alot of hardwork, and an eight hour day is a good start, they might reconsider.
  4. Ive always thought of farm land as like a TIP. Its going to reflect inflation a lot better than CPI and in the good years it pays dividends.
  5. you are way late. i live in the farm belt. land has already doubled and trippled in some cases. it is way over where it will cash flow already. we have 500 acres of farmland in south dakota. in 2000 we had a bid of $350 an acre but didnt sell. recently some land close to ours sold for $1000.
  6. Daal


    I think your right. i guess land would be better than the futures before the boom with depressed prices, almost no downside and the free upside leverage
  7. Why are you way late? This is an asset class that hasnt really appreciated for 25 years.
  8. buying farmland now is like buying houses a year ago. the rental pe is way out of wack. it wont cashflow. our land cash rents for $40 per acre. we bring in $20000 per year on an investment worth 500,000. then you have taxes and insurance. it is not a great investment.
    i would sell in a heartbeat for $1000 but cant at this time because of estate tax planning.
  9. The only way we ever made any money farming was to sell out to developers...chance of that happening now, slim & none. Even then we got it back 4 times, started call it Yo-Yo Acres:)
  10. bighog

    bighog Guest

    Mysterious discrepancies in grain prices baffle experts
    By Diana B. Henriques
    Published: March 27, 2008

    NEW YORK: Economists note there should not be two prices for one thing at the same place and time. Could a drug store sell two identical tubes of toothpaste, and charge 50 cents more for one of them? Of course not.

    But, in effect, exactly that has been happening - repeatedly and mysteriously - in markets that set prices in the United States for corn, soybeans and wheat. And even economists who have been studying this phenomenon say they are at a loss to explain it.

    Whatever the reason, the price for a bushel of grain established in the public derivatives markets has been substantially higher than the price of the same bushel of the same grain at the same moment in the cash market.

    When that happens, no one can be exactly sure which price accurately reflects supply and demand in these crucial commodity markets, an uncertainty that can influence food prices and production decisions around the world. Prices set in the U.S. markets are used as benchmarks for grain prices globally.

    These disparities also raise the question of whether farmers, who rely almost exclusively on the cash market, are being shortchanged by cash prices that are lower than the derivatives market says they should be.
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    "We do not have a clear understanding of what is driving these episodic instances," said Scott Irwin, one of three economists at the University of Illinois at Urbana-Champaign who have done extensive research on these price distortions.

    Irwin and his colleagues, Philip Garcia and Darrel Good, first raised the alarm about these price distortions last May, in a study financed by the Chicago Board of Trade. Their findings drew little attention then, Irwin said, but lately "people have begun to get very seriously interested in why this is happening - because it is a fundamental problem in markets that have always worked very well."

    Market regulators say they have ruled out deliberate market manipulation. But they, too, are baffled. The Commodities Futures Trading Commission, which regulates the exchanges where these grain derivatives trade, has scheduled a forum on April 22, in part to hear views on the topic from a broad sample of market constituents, a commission official said.

    The mechanics of the commodity markets are more complex than selling toothpaste, of course. The anomalies here are occurring between the price of a bushel of grain in the cash market and the price of that same bushel of grain, as determined by the expiration price of a futures contract traded in Chicago.
    #10     Mar 29, 2008