What do you give a hedge fund manager who has everything? How about a farm? With the price of food skyrocketing across the globe, some investors are trying to figure out how to profit from the global food crisis. Instead of investing directly in companies that make fertilizer or other agricultural products, they are buying actual farmland. As the Financial Times recently pointed out, "Hedge funds and investment banks are swapping their Gucci for gumboots as they bet on rising food prices by buying farms. Billions of dollars are flowing into farmland across the world as investors gorge themselves on vast tracts of Australia, South America and eastern Europe."
For deep-pocketed institutional investors, there are two basic strategies: (1) buy successful farms to profit from rising food prices and possible land price rises, or (2) pick up cheap land in developing countries and bring it into production or improve it to raise yields. Option #1, obviously, is a lot easier than Option #2, especially for hedge fund managers with little or no background in agriculture: "City types who usually use a Bloomberg terminal to search for fertile investment opportunities are not the most obvious people to consult on whether winter wheat will grow in a moderately acidic soil (it will)." The types of numbers tossed around in the Financial Times article are certainly, ahem, food for thought. The idea that hedge fund managers in New York and London are starting to control a portion of the world's food supply is a provocative idea, to be sure.
So... How long will it be before we see the first farmland ETF?
[image: Farmer Plowing via Wikimedia]
