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Like iron to a magnet: farmland investments pull billions globally

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Australians are buying land in the U.S., the Chinese and Swedes are buying land in Australia, the oil-rich Saudis are gobbling up land in South America, everybody’s eyeing the rich soils of Russia and Ukraine, where land is dirt cheap (but politics and government are uncertain), and the Chinese and Indians are coveting Canadian farmland, still relatively inexpensive to them. So widespread is the trend for agricultural land as an investment that some governments are considering regulating large land purchases by foreign interests.

It’s being termed “The Global Land Grab,” as large investment groups and corporations — and even public pension funds and church organizations — buy up farmland around the world.

Australians are buying land in the U.S., the Chinese and Swedes are buying land in Australia, the oil-rich Saudis are gobbling up land in South America, everybody’s eyeing the rich soils of Russia and Ukraine, where land is dirt cheap (but politics and government are uncertain), and the Chinese and Indians are coveting Canadian farmland, still relatively inexpensive to them.

So widespread is the trend for agricultural land as an investment that some governments are considering regulating large land purchases by foreign interests.

GRAIN, an international nonprofit organization that conducts independent research and analysis, in a recent report, notes that investment funds “continue to flow to overseas farmland like iron to a magnet … and some of the biggest players looking to profit from farmland are pension funds, with billions of dollars invested.”

The funds, which have some $23 billion in assets, are reported moving $5 billion to $15 billion into farmland acquisitions. Their commodity and farmland investments are expected to double by 2015.

Why? “Globally, this is big money,” the report notes. “They see in farmland what they call ‘good fundamentals’: a clear economic pattern of supply and demand, which … hinges on a rising world population needing to be fed, and the resources to feed those people being finite. Fund managers see relatively low land prices (and) see those prices moving in synch with inflation … thus providing a diversified income stream. They see long term payoffs from the rising value of farmland and the cash flow that will come from crop sales, dairy herds, or milk production.”

With commodities and food prices steeply rising, “agriculture is one clear and unmistakable source of payoff for institutional investors.”

Today, the report notes, commodities such as farmland average 1 percent to 3 percent of pension funds’ portfolios. That is expected to rise to 3 percent to 5 percent by 2015.

“While figures of 1 percent, 3 percent, or 5 percent may sound terribly small, these are huge funds, where 1 percent may amount to several billion dollars,” the GRAIN report notes.

Among funds and organizations with large chunks of money in commodities/farmland, according to Canada’s Globe and Mail newspaper:

  • TIAA-CREF, the $400 billion pension fund for U.S. academics and researchers, owns roughly $2 billion worth of farmland in North America, South America, Australia, and Europe.
  • The Church of Jesus Christ of Latter Day Saints, owns more than $5 billion worth of farmland in Canada, Mexico, Brazil, Argentina, New Zealand, Australia, Great Britain, and the U.S., including a 290,000-acre Florida property, one of the largest ranches in the U.S.
  • Hancock Agricultural Investment Group manages about $1.3 billion worth of farmland, including 210,000 in the U.S.

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