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Bears and Bulls on Land Prices
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Ray (ecks)
Posted 1/14/2008 15:05 (#283115 - in reply to #283095)
Subject: RE: Bears and Bulls on Land Prices



I don't think anyone knows where this grain market, fuel market or land market is going to go. If they did they would trade it for themselves and go buy an island to retire to. As for invesment traders, I've got a cousin who's supposedly got the world by the tale, owns 2 or 3 boats, island in one of the great lakes, new home in Wyoming, but will tell investors anything they want to hear.

The cover-story in the year-end issue of Barron's magazine speaks for the bears. In it Steve Leuthold of Leuthold-Weeden Investment Capital in Minneapolis predicts a 15 percent to 20 percent decline in farmland prices in three to five years. Leuthold's view matters, Barron's says, because in 1982 he predicted a 50 percent pullback in farm prices -- which turned out to be optimistic.

 Does that mean that since I've made 2 or 3 predictions on the grain market that have come true that I'm a bigger expert than he is?

They quote someone from Oregon saying that land values are off there in some areas of the state, ok, that's possible. I can show you land sales from several counties around here where land values have doubled in less than 3 years. Nothing has gone down here in 60 years. My Dad moved into this area in 1950 since then every piece of land between him and the city has been for sale. Every time they thought it was too high, every single one of the farms would have been a great investment.

With the amount of off farm investment in US farmland I think you'd have to get in some mighty remote areas to find a spot that didn't have outside influence from something other than ag interests.

-- Marc Faber's view that U.S. farmland is "wildly overpriced." Faber is a renowned Hong Kong-based investor who bought New Zealand farmland a few years ago but now favors farmland in Russia, Paraguay and Uruguay.

US land is priced at the going "market" price. There has to be a willing buyer and willing seller, who's to say one or both of them is wrong. If this gentleman wants to buy land in Russia etc. I say go for it. To me it sounds like he's just trying to make himself sound good for investors he's hoping to steer to other countries.

Ed you mentioned in another post that mgmt in today's world is going to be more important than ever and that we may lose more farmers than ever because of the risks invloved with inputs being so high, I'm sorry, but I hope I'm paraphrasing you correctly and I agree totally with your comments there. Yes, we've got high prices, but we've also got high expenses and little mistakes could get blown out of proportion if we're not careful.

As for land, I'd say this, I have no doubt there are pieces overpriced in some locations of this country, but over the long haul I'd rather have my money in land than anywhere else. Look at California and see how hard it is to get a building permit to take land out of agriculture. They have realized that there is no more land being made. What you see is what you get.

As for crude oil going down, that could happen, but just how far do you think fuel prices will go? The oil companies have figured out how to keep supply down and keep demand and prices up, do you think they are going to give up the billions of dollars they could make just to bring fuel prices down?

 

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