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Saturday, September 25, 2010

Farmland the next bubble? - WSJ

We just had a housing bubble, so we in a farmland bubble?  Or we seeing the result of a population boom.
Famously, land has also proven a terrific hedge against inflation. It has boomed when prices skyrocketed—such as during the two world wars, and the 1970s. There is a serious risk that we will see a surge in inflation down the road: You could argue the governments need it. No wonder investors have been bidding up the prices of other inflation hedges, such as gold and inflation-protected bonds. Why not land?
Typically, investment assets in the U.S. are more expensive than their counterparts overseas. But not when it comes to land. Insight Investment's Ms. McBride says U.S. farmland is well down the global table in price per hectare. Average prices are about $5,000 per hectare. In Europe they can sometimes go as high as $24,000. U.S. prices are closer to those of lesser-developed countries. One reason? We have so much of it. Among big countries, America, unusually, also has far more arable land than it needs to feed its own population.

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