More than 600 registered attendees paid $2,500 each, plus accommodation in the Waldorf-Astoria, recently to attend the Global Ag Investing conference in New York.
They include the institutional investment crowd. Even I had to wear a tie. They throw in some great lunches for the fee. The ones missing were farmers. Farmers and institutional investors really don’t speak the same language so there are interpreters who speak agriculture in institutional-speak to communicate.
Institutional investors are interested in agriculture as evidenced by the growing interest in these conferences. Institutional investors have been uncomfortable with ag investments, but realize the macro-story relative to the population demographics of the world favors commodity investment in portfolios and they are trying to figure out how to do it.
They prefer to invest from 50,000 feet in black and white as what goes on at ground level involves some dirt, blood and sweat in color and they are not used to that.
Agriculture entails risks that farmers don’t think twice about that institutional investors have difficulty managing to suit their comfort levels.
The investment crowd has been kicking the tires considering ag investment for some time now but most have not yet gone for a ride. I think they will eventually have enough conferences where they will talk themselves into investing, but most are still standing at the door looking in. I think they have already waited too long, but that is because I know agriculture and the sector is still pretty foreign to them.
The world needs more food. That is what ag markets have been signaling. The markets have been trying to attract new investment into the ag sector and it takes a lot more capitalization to expand the production base in order to be able to meet future demand.
Wall Street has the capability of providing the capital once they become confident with the return. It is not for everybody. Farmers would not like working with these people. There is a big divide that has to come together and I doubt that Wall Street will ever fully embrace the commodity sector.
I do have a use for them, however. Let me explain.
Renowned commodity investor Jim Rogers was the keynote speaker who believes that there is still gold in the ag sector and that the macro-bull market commodity super-cycle has more to run.I would tend to agree with the caveat that while the long term trend is up and I do not believe the ag sector has yet become a bubble, the uptrend line can be tested along the way.
We had one special instance of farmland selling for $20,000 acre here in Northwest Iowa. I would not be surprised if such sales were common at the top of the bubble. I also expect that it will be these institutional buyers that will be the buyers at the top.
They have been wasting their time kicking tires for a few years now and as the macro super-cycle unfolds before their eyes at some point they will find investing in the ag sector irresistible and come rushing in. That will be the top.
I don’t have an IRA or stock portfolio. I am about as uncomfortable with Wall Street as they are investing in my world. Rogers believes that Wall Street will create farm mutual funds to include in public retirement portfolios. I suppose so, but that is what farmland is now.
Rogers is a cheerleader for the ag sector. He noted that there are more college graduates getting degrees in public relations in the U.S. than graduate with an ag degree. Those with the ag degrees are being offered two to three job opportunities, while the graduate with the PR degree may be flipping burgers living at home with mom and dad.
ISU had a 99 percent placement rate from the ag college. If that last 1 percent would have gone to class they’d have gotten a job, too. Rogers said that Wall Street is passe and that the ag sector is where global investment will boom. He said that there were 5,000 MBA graduates in 1960 and 200,000 annually today saturating that market.
China produces engineers to run their country, while we produce lawyers. Nobody studies mining in the U.S. anymore. There is no unemployment problem in Northwest Iowa and up in North Dakota they can’t find people to fill the jobs. The government is a lot better at giving out unemployment checks than it is at helping the private sector manage the need for a changing workforce.
Rogers lives in Singapore seeing to it his young daughters speak Mandarin. He thinks that China will drive the next century. I think that China will be in the same vehicle as the U.S., but I think it will still be the passenger.
Everybody thought not long ago Japan INC. would run the world economy. Didn’t work out that way, did it? The U.S. just has too many resources, physical, natural and human for even our politicians to screw up. Warren Buffet has fared pretty well taking the other side of bets against America.
I personally prefer Brazil over China for foreign investment. I think there is less political risk. I have one son that is fluent in Brazilian Portuguese and I will send the other to visit to learn it as well.
The average age of a farmer in Brazil is 35 years old. That compares to 58 in the U.S. and Australia and 66 years old in Japan. Rogers advised to marry a farm girl. I did that. That is good advice for my son, too.
Rogers says that we will know that the ag sector is at the top of the bubble when CNBC has an ag network.
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.