Loans & Finances Today

Currently, farmland is of interest because the returns are not correlated to the returns on U.S. stocks. Watch for overconfidence. Lack of correlation with U.S. stocks is only a good thing if returns are at least as high as inflation.

Many speculators currently believe that farmland, crops, and livestock are about to turn up for a sustained period. They argue that farmland is disappearing at a rate of a million acres a year as the cities and population grow. Demand will increase and supply will dwindle. However, other speculators are selling out. They believe that supply will grow faster than demand as agricultural technology improves and cheap imports flood the market.

They also see farm profits being squeezed. On one side, high-tech seeds are becoming more expensive, energy costs are rising, and fertilizers are more expensive. On the other side, processors and consumers pay lower prices and a fluctuating dollar hurts overseas sales.

No one knows for sure how this speculation will work out. That is why it is a speculation. Historically, overconfident speculators have lost on farms.