Farmland Barometer - July 2011
Summary
Agriculture is experiencing incredible forces from every angle. At Heartland Ag Group Ltd. we are watching the following key areas:
- Commodity Prices - We are using $6.00 corn and $12.00 soybeans as a focal point for our 2011 income projections. We will have volatile trading ranges.
- Interest Rates - Are at historic lows - - attractive for farmland mortgages. Farmland returns are attractive to alternate investments. However - - interest rates will rise to combat inflation in future years.
- National Politics - A presidential election year is coming up - - be careful. The stimulus package, deficit spending, and Federal Reserve monetary policy will be very inflationary long term.
- World Population - There are a lot of mouths to feed. The growth trend is slowing but global numbers will pass the 9 billion people mark by 2050 (up from 6 billion today).
- Sovereign Debt Crisis - Apparently everyone on the planet is spending more than they are taking in. How do you stop this nonsense?
- U.S. Tax Policy - There will be a giant sucking sound from Washington D.C. as politicians search for money to fill deficits. Income, capital gains, and estate taxes will be threatening.
- Ethanol - Our Wall Street darling status has turned to political pigs at the trough. The boom might be over.
- Inflation - Farmland is a wonderful hedge against inflation and perhaps our rapid rise is signaling inflation coming. China has raised interest rates five times this year to offset inflation.
- Investor Demand - Agriculture is experiencing an acceleration of money moving from soft assets (financial investments) to hard assets (farm real estate). That will become global in scope.
- Net Farm Income - We see a solid future for net profits from farmland that will drive farmland values upward into the future.