Farmland Blows Up in 2011

Written By Brian Hicks

Posted December 14, 2011

“What a God-awful year! The economy’s flat, my house is down, and now the damn Brits are threatening to blow a hole in the side of my portfolio.”

I hear a lot of whining about the market, but the truth is it hasn’t been that bad…

In fact, we remain in a rising market.

Not Half as Bad as It Should Be

WD 121411 DOWYes, the Dow is still off last summer’s highs.

But even autumn’s substantial slippage has left us up some 87% over 2009’s lows.

Heck, last I checked, the Dow was even still in positive territory for 2011 — not by a lot, mind you, and probably for all the wrong reasons…

But still pretty damn good, considering many of us are arguing about whether or not we are in the next depression.

Historians morbidly joke that in the end, “everyone dies.” Even entire civilizations kick the bucket eventually.

But while these are indeed hard times, they are most probably not the “End of Times.”

Folks Gotta Eat

Next week, I will resume looking for flies in the ointment and thumbs on the scale. (After all, saying “no” to Washington propagandists and Wall Street con men is my main job here, and I do it with relish.)

But let’s take a break for just a moment and assume that the world — and most of its economy — will still be intact come January 1, 2012.

I can tell you one thing’s for sure: After a bicarbonate and a couple aspirin, and perhaps a little hair of the dog, 7 billion folks are gonna want a little something to eat…

And that’s an awful lot of eggs, bacon, and bagels.

Best Year EVER!

While we were all busy fretting about depressions, Chinese hard landings, and euro crashes, American farmers had the best year in decades.

The U.S. Department of Agriculture says crop sales are expected to pass the $200 billion mark…

2011 farm profits are expected to spike some 28% to $100.9 billion. This is an all-time record.

Remember Steinbeck’s Dust Bowl tales of cash-poor farmers losing the family spread to evil foreclosing bankers?

In 2011, bankers may still be evil SOB’s.

But American farms’ cash on hand is slated to top $100 billion, also for the first time ever.

WD 121411 FordTruckin’

There’s a wild historical inversion for you: Privileged white kids are protesting in the streets that investment banks ain’t hiring and college loans are breaking them.

But the “redneck dirt farmers” back in the home county are paying off old combine loans — and buying new ones with cash at $200k a pop.

Care to guess what the best-selling “car” in America is right now?

Ford’s F-Series pickup trucks. Sitting at number two is the Chevy Silverado.

Oil in the Corn Fields

And it’s not just a “food thing,” either…

Yes, “feeding the need” of growing billions in China, India, and other developing countries is jacking global commodity prices. But skyrocketing crude is driving up ethanol prices, too, turning precious Rockwellian family farms into virtual oil wells worth millions.
Again, we reach into the Department of Agriculture’s deep boodle of stats and figures:WD 121411 Oil in the Corn

• The United States farm real estate value, a measurement of the value of all land and buildings on farms, averaged $2,350 per acre for 2011 — up 6.8% from 2010.

• Cropland value increased by $260 per acre (9.4%) to $3,030 per acre.

• In the American Corn Belt region, the average value of farm real estate increased 15.9% year over year to $4590/acre.

Stuck in the Mud

So farming is a pretty good deal right now.WD 121411 MOO But farm stocks are still stuck in the mud.

Remember last week when I mentioned uber-trader Jim Rogers was long commodities right now?

Take a gander at the chart for the Ag ETF he founded, Market Vectors Agribusiness (NYSEArca: MOO).

This ETF gangs together major farm-belt players like Monsanto (NYSE: MON), Deere (NYSE: DE), and Potash Corp (POT:TO).

Much like the rest of the hapless Dow Industrials, Moo is off its 2011 highs by some 20%.

But while the outlook for many of these industrial outfits is in some serious doubt, the folks working the farm belt stand a decent chance at record-breaking profits.

Now, I usually feed you option plays in this space. But then again, I am usually a real sourpuss. And you could certainly speculate with a couple of long-dated MOO leaps, looking to make anywhere from 134% to 295%, depending on just how explosive a MOO turnaround might be.

But frankly, this time around, I suggest most of you simply ought to grab some MOO shares and stick ’em in your back pocket for awhile.

Heck, a move back to MOO’s 2011 high would still give you better than 20% gains…

And that oughta pay for a lot of Alka-Seltzer.

Good luck and good hunting,

Adam Lass
Editor, Wealth Daily

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