Tag Archives: press-releases
Pension Funds Want To Invest In Farmland
March 7, 2013 – 9:43 Photo: Oana Pavelescu A number of major pension funds have decided to join forces to increase investment in arable land, an area that historically has been under-capitalized, transmit Reuters Wednesday. An example is the Swiss fund Adveq that talks with three European pension funds and asset management fund in South Korea to buy farmland. Last year one of the largest institutional investors in the world, TIAA-CREF, has joined forces with several pension funds, including British Colombia Investment Management Corporation and AP2 to create an investment vehicle worth two billion dollars to buy farmland. This new approach could attract significant funding from pension funds and other institutional investors to arable land, a sector where pension funds are reluctant to invest themselves. ‘We believe that agriculture and arable land is an asset class that is still developing, “said Director of TIAA-CREF, Biff Ourso. “By combining forces to create savings and transparency that many investors looking for her today,” added Ourso. Investors are attracted by arable land amid increasing global demand for food and low prices due to agricultural land compared to traditional assets. However before pension funds have adopted a cautious attitude towards this sector as several NGOs have rung alarm bells at the possibility of massive purchases of farmland by foreign investors to push up food prices. “Agriculture is a sensitive topic for two reasons: the first is that there is a fundamental right to food and the second is that the land is considered sacred in any country,” said Mahendra Shah consultant.’My opinion is that pension funds are afraid to go it alone in this area and want to share the risks with other partners, “added Shah. A study by Macquarie in 2012 shows that institutional investment in arable land accounted for 30-40 billion, while the total amount of arable land amounts to 8.400 billion dollars. So far, institutional investors have generally focused on regions that are net exporters of food including North America, Australia, South America and Central and Eastern Europe. Continue reading
Farmland Boom Carries Threat Of Collapse
New York Times If the price of corn falls — and many forecasters predict it will, particularly if the ethanol boom wanes — the price of U.S. farmland will fall with it. Across the American heartland, farmland prices are soaring. In places like Waco, Neb., and Chickasaw County, Iowa, where the boom-and-bust cycle of farming reaches deep into the psyche, some families are selling the land that they have worked for generations, to cash in while they can. Behind the rush is the age-old driver of farm booms: high crop prices. Corn, in particular, has been soaring, reflecting demand overseas and, domestically, for ethanol. High prices mean good profits for farmers, and many are using their growing incomes to bid for land. Sensing opportunity, investment firms are buying, too. But if the price of corn falls — and many forecasters predict it will, particularly if the ethanol boom wanes — the price of farmland will fall with it. While many farmers have borrowed little money or used cash to finance their purchases, those who have overexpanded could run into trouble, leaving banks and other creditors with their bad debts. Continue reading
New Report Examines Ag Wealth Effect On Farmland Values
What effect will the historical wealth effect in agriculture have on farm debt and leverage if farm incomes fall dramatically? Since 2009, wealth in the U.S. farm sector has surged along with booming farmland values. In the latest issue of the Main Street Economist , Omaha Branch Executive Jason Henderson and Nathan Kauffman, economist, explore the historical wealth effect in agriculture and what it could mean for farm debt and leverage if farm incomes fall dramatically. Similar to nonfarm households, farm enterprises historically have used wealth to support consumption and investments when income fades. During years of low income, instead of allowing investments to fall with profits, farmers tap their existing wealth to finance and maintain their capital investments near previous levels. Historically, the sharp accumulation of debt has preceded financial crises. Henderson and Kauffman point to the 1970s as the clearest example of the wealth effect in U.S. agriculture. A surge in U.S. exports in 1972 led to a doubling of U.S. crop prices and a spike in farm profits. Although farm profits quickly retreated, farmers accelerated their investments, and capital spending did not peak until 1979. In 2013, historically high farm incomes are projected to keep U.S. farm debt and leverage low. Yet, longer term projections suggest that farm incomes could fall dramatically in 2014. If agriculture’s historical wealth effect holds true, farm enterprises might use existing wealth to finance and smooth investment spending, sowing the seeds for another round of debt accumulation. The article is available at www.kansascityfed.org/publications/research/mse . Continue reading
