Wall Street is buying up U.S. farmland

I found this story off Daily Kos, and was fascinated by it.  The original source story is through Mother Jones:

A recent report by the Oakland Institute documents a fledgling, little-studied trend: Corporations are starting to buy up US farmland, especially in areas dominated by industrial-scale agriculture, like Iowa and California's Central Valley. But the land-grabbing companies aren't agribusinesses like Monsanto and Cargill. Instead, they're financial firms: investment arms of insurance companies, banks, pension funds, and the like. In short, Wall Street spies gold in those fields of greens and grains.

Why are they plowing cash into such an inherently risky business with such seemingly low profit potential? For Wall Street, farmland represents a "reassuringly tangible commodity" with the potential for "solid, if not excellent, returns," the Oakland Institute notes—something clients are hungry for after being recently burned not long ago by credit-default swaps and securities backed by trashy mortgages. As the saying goes, you can't make more land; and as the Oakland Institute notes, "over the last 50 years, the amount of global arable land per capita shrank by roughly 45 percent, and it is expected to continue declining, albeit more moderately, going toward 2050."

Nearly 40 percent of US farmland is rented—and more like 50 percent in ag-heavy regions. 

Financial institutions and food-strapped countries like China and United Arab Emirates have already been snapping up land in the developing world, where prices are low and labor is cheap. But now, the Oakland Institute reports, pricey US land is also looking attractive, because it "boasts some of the world's most fertile soil, advanced industrial farm technology, strong private property rights, [and] federally subsidized crop insurance."

And Wall Street likes a good bubble. Farmland prices have soared to all-time highs in recent years, pushed up by the government-mandated corn ethanol boom. The average per acre price of Iowa land surged about 60 percent in real terms between 2007 and 2012, and rents have jumped in lockstep.

The report notes that over the next 20 years, nearly half of US farmland—about 400 million acres—will be up for sale as our aging base of farmers moves into retirement. So far, Wall Street cash is moving onto US farms like a stream; financial firms own just about 1 percent of total acreage, and most farmland is still bought by farmers, not institutional investors, the report states. But as more prime land enters the market, the hot money could soon flow like a gusher. By mid-2013, farmland was such a hot commodity that institutional investors were complaining of a tight market for prime farmland—that is, they had more money committed to buying farmland than they could find attractive deals for. But the supply of prime farmland for sale will expand as farmers retire in the coming decades, and Wall Street looks poised to move into the market.

In a sense, it doesn't surprise me that Wall Street financial firms are buying up U.S. farmland here.   For Wall Street, it is all about finding the next profit-making scheme.  Goldman Sachs was caught stockpiling over a million tonnes of industrial metals, stashing the metals into warehouses over a long time to drive the price of such metals up that the financial firm is trading on commodities markets.  Wall Street has already shown its willingness to hoard grain in its rampant speculation for profit.  Now Wall Street is buying up the farmland to grow the crops, which Wall Street speculates and trades on the the commodities markets.  It is a heavenly, profit-making match.  The financial firms control the farmland, which they can rent out to grow the crops.  There is profit in the rent payments for the farm.  The financial firms then speculate in trading the crops on the commodities markets, making more profit.  If the financial firms want to raise prices on crops, they can always cut back on the amount of land being farmed for a particular crop, thus decreasing the supply of the crop and increasing the price and profit for the financial firms.  The money just flows upward.  Meanwhile, we are going to get socked with higher prices due  to the rent payments sent to these financial firms. 

The Wall Street Casino Game continues to play on.