What do you do these days if you have more money than you know what to do with?
Forget buying tropical islands, grand houses in hoity-toity neighbourhoods, yachts or other expensive exotic creature comforts.
Apparently, you buy farmland.
At least that’s what some well-heeled athletes in the U.S. are reportedly doing after pooling their funds into a US$125-million account with Patricof Co. (P/Co), an investment platform billed as “leveraging the unique relevance of world-class professional athletes.”
Given the size of their salaries, these athletes are quite likely buying the other stuff too. Cincinnati Bengals quarterback Joe Burrow and longtime NBA player Blake Griffin, reportedly two of the 20 athletes behind this new venture, make US$9 million and US$36 million respectively, according to their online player bios.
P/Co has started buying up farmland across the U.S. corn belt, the Pacific northwest, and northern Minnesota, its website says. “The farms have high soil quality, strong crop yield, and grow row crops which are planted annually, minimizing risk. Farmland has historically provided attractive risk-adjusted returns, stable annual income, and a solid hedge against inflation.”
Exotic it is not. But farmland is a smoking-hot investment these days, which is good news if you already own some, but not so good if your dream in life is to buy a patch of turf so you can grow things for a living.
It’s not just professional athletes investing. Bill Gates, of Microsoft fame, is credited as being the largest single owner of farmland in the U.S. with holdings of 242,000 acres.
In Canada, that title goes to former Winnipeg industrial developer Robert Andjelic, who reportedly owns 225,500 acres in Saskatchewan. He told the Globe and Mail that started buying up farmland in 2009 as a hedge against inflation.
Farm Credit Canada analysis shows land values across Canada rose an average 8.3 per cent in 2021 and another 8.1 per cent during the first six months of 2022, comfortably higher than last year’s inflation rate of 6.8 per cent.
While it would be wrong to assume land prices will never decline, the last time that actually happened dates back 30 years or more. In most years, farmland values rise at high single- and sometimes double-digit rates.
That’s not bad for a hard asset that’s immobile, except when it blows away, and which in these parts, sits idle for six months or more each year.
However, it means land values are increasingly decoupled from the value of what the land produces, which is a good news-bad news scenario for farmers. Farmers who own at least some of their land aren’t solely dependent on their farming prowess to retire wealthy. It’s in their best interest to farm in ways that preserve the value of that asset, which at times could mean decisions that are less focused on yield.
Tenant farmers won’t have land to sell when they retire. There is more incentive to manage in ways that maximize productivity, which if they aren’t careful, could deplete the asset.
Many farmers use a combination of owned and rented land. They rely on annual production to cover their fixed and operating expenses, so those rising land costs are baked into their risk. Couple that with the rise in interest rates and operating margins are getting squeezed.
Canadian laws prevent foreign investors from buying its farmland so don’t expect to see agents for professional U.S. athletes bidding at local sales any time soon. However, domestic competition for farmland is expected to remain high.
As the saying goes, they aren’t making any more of it. In fact, Canada’s prime agricultural land base is shrinking at an alarming rate.
The 2021 Census of Agriculture found that the agricultural land base in Manitoba declined 2.9 per cent since 2016. In Ontario, the loss was around 4.7 per cent and that’s before the provincial government released parts of its protected GreenBelt to urban development.
It’s one thing to see farmland consolidate under non-farming buyers who at least plan to keep it in agriculture. That’s how business works.
It’s quite another to see it diverted to other uses. That’s just plain short-sighted.
Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at lrance@farmmedia.com
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
