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Jun 04, 2009

As populations expand, land prices will soar. That at least is the big bet being placed by U.S. equity firms, major global investors—and, increasingly, the wealth of nations.

By Brian O’Keefe

On a sunny Friday morning, Shonda Warner and I are in her red Toyota pickup heading southwest on Highway 61 out of Clarksdale, Miss., on our way to see one of her farms.

“It’s really hard to buy property at the right price,” she says along the way. “Farmers are smart and they talk. And if one Town Car full of Wall Street types rolls into town and makes a bid, suddenly all of the prices go up.”

A Nebraska farm girl who went on to a globetrotting career as a derivatives trader for Goldman Sachs and then as a hedge fund executive in London, Warner, 45, is back on the farm pursuing what she believes is a huge moneymaking opportunity.

Two years ago, Warner launched an investment firm, called Chess Ag Full Harvest Partners, with a fairly simple underlying strategy: buy undervalued farmland in the U.S. and profit from the coming global agriculture boom.

Last June, she closed her first fund with $30 million. She says her ultimate goal is to take the company public as the first farmland-only real estate investment trust in the U.S. “The returns in agriculture haven’t looked sexy for a long time,” she says, “but I think that’s about to change.”

…So Goes the World

Warner is far from alone in making that bet.

Over the past few years, hedge fund gurus like George Soros, investment powerhouses like BlackRock and retirement-plan giants like TIAA-CREF have begun to plow money into farmland—everywhere from the Midwest to Ukraine to Brazil. Canadian private equity firm AgCapita, which raised $18 million in 2008 to invest in Saskatchewan cropland, estimates that as of the first quarter of 2009, more than $2 billion of private equity money had been raised for farmland investments globally, and another $500 million was planned.

Why? Consider one fact: in 1960, there were 1.1 acres of arable farmland per capita globally, according to UN data, and by 2000 that had fallen to 0.6 acre (see chart). Over the next 40 years, the population of the world is projected to grow by 50 percent, from 6 billion to 9 billion.

Those statistics have attracted not just private equity and sovereign wealth funds, but also the governments of crop-starved countries eager to secure food supplies for their rapidly growing populations.

Farm Country as the Last Refuge

Back on Highway 61, Warner is reflecting on the fact that the wider world is mimicking her own journey back to the farm. “I think it’s fun to get Wall Street types and farmers talking,” she says. “They might have a lot to offer each other. A couple of years ago when I started telling my buddies in New York my little story about row-crop agriculture, it seemed really exotic. But I think people have sort of been slapped around and gotten a wake-up call, and they’re thinking, ‘Oh, this kind of makes sense.’”

There’s another thing she finds comforting about what she’s doing. “I’ve always personally liked the idea,” she says, “that even if the bottom dropped out of this whole credit bubble and the world blew up, that the farmland, while it might not make a return for two or three or four years, was going to be there down the road. Because in the end, people have to eat.”


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ok thanks

karim traore
Jun 16, 2009

i very must happy to get in to this media mainstream thanks

karim traore
Jun 16, 2009

Your article on Hispanics in America is just what we have come to expect from the mainstream media. The mainstream media continues to promote the tired and misguided myths that have become blatantly false in a changing world. These myths include the ideas that America is an empty land with unlimited resources, that we are the envy of the world and provide the best standard of living, and that all people make a positive contribution to society (even the dumbest and least educable of our immigrants). For centuries, we in America have been able to exploit the fact that the native Americans, due to their hunter-gatherer level of civilization were unable to produce enough food to support a large population. With more advanced agricultural, industrial, and military technology western Europeans, and later people from other regions have been able to emigrate to and settle what was then a relatively empty land. Times have changed. We are becoming more crowded, and we are running out of resources of land, water, and energy. We now live in a time of limits. We can no longer afford to continue to pretend we have unlimited capacity for new immigrants, for every new immigrant means there are less resources and opportunities available for our own children. America may be the land of opportunity for immigrants from the poorest of the third world countries. However, I know from my contacts with Germans, Fins, French, Austrians, and even Italians, that very few of them would consider emigrating to the US. Of course may are deterred by the rate of violent crime here, but the hard truth is that western Europeans generally live better un their home countries, with both quality of life and even standard of living, than we do in America. The new immigrants to the US are mostly Hispanic, and they tend to represent the poorer and least educated of their home countries. Let

John Collins
Jun 14, 2009