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    • Farmland, Staglation, Political Risk 9/13/2008
    My view is that poltical stability will be a great differentiator in the returns generated by hard asset/commodity investments going forward. Many governments are taking the view that energy and agriculture are strategic industries and acting accordingly. The author is correct that farmland has already moved quite significantly in value in most politically stable regions of the world - with one exception - Canada. Agcapita Farmland Investment Partnership research shows the average price of farmland in western Canada is still only $660/acre with the province of Saskatchewan below $400/acre. This is for good quality dryland wheat farming land, world class infrastructure, rule of law and enforeable title. Compare that to $2,400/acre in Argentina with poor infrastructure and massive poltical risk (see recent export tariffs imposed on agricutlural commodities).

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      • Farmland Investment Partnerships 9/13/2008
      For the average investor, diversification is important but difficult to obtain in a market with high postive correlations between virtually all asset classes. This is a very unusual state of affairs historically. There are very few uncorrelated assets classes accessible to the average investor. The author correctly points out that farmland have a small negative correlations to stocks and fairly high correlation to inflation - an allocation of capital to this asset class might be something to consider going forward in a market with a federal government dedicated to inflating the currency away. The challenge becomes how to cost effectively deploy capital in these areas - private equity style investment funds are useful as they provide cost effective diversification and manage the complex operational issues associated with holding farmland and renting it out.

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      • Inflation, Rotation, Hard Assets 9/18/2008
      The equity and bond markets have benefited from a long period of low inflation, but ongoing and massive central bank liquidity injections point to a far less benign environment of elevated inflation ahead. Research by our firm Agcapita Farmland Investment Partnership (Calgary, Canada private equity firm) shows investors must be prepared to rotate into asset classes with different characteristics. During the last commodity bull market & high inflation period in the 1970’s, equities materially underperformed farmland. Western Canadian farmland went from around $100/acre to $550/acre (550% total return and 176% in inflation adjusted terms), cash held in a money market account barely kept ahead of inflation (6% inflation adjusted return) and the S&P 500 index returned less than 2% per year (a loss of almost 50% in inflation in adjusted terms) We believe the world is still in the early stages of this current commodity bull market. When agriculture commodities prices are compared against their previous inflation adjusted highs they are significantly discounted implying scope for further increases: ? Corn is US$ 5/bushel currently compared to US$16/bushel in 1974, ? Wheat is US$ 7/bushel currently compared to US$27/bushel in 1974 ? Canadian farmland is C$ 660/acre currently compared to C$1,100/acre in 1981

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