by Chas Bonner
After a long conversation with a colleague in California, after reading countless headlines and articles about what is wrong in America, we look forward to reporting on at least one positive aspect in our country.
The full year report from NCREIF (National Council of Real Estate Investment Fiduciaries) just arrived in our office. Despite the fact that 2009 saw a financial loss in commercial real estate (including industrial, office, retail) in excess of <26%>, farm land across the nation saw positive cash income of 5.50% and land appreciation of 0.78%---far less than prior years, but nonetheless positive.
However, as the analogy goes “It is a recession when your neighbor loses his job, but a depression when you lose your job.” Many farmers saw no income and no appreciation in their land this past year, and therefore gain little consolation even though the national averages were positive.
NCREIF is considered “the Bible” of real estate valuations since it has been in existence for 20 years, is based upon thousands of properties managed by tax exempt institutions (pension funds, insurance companies, university endowments, etc.), and all properties must be appraised annually. There are other organizations that also report on incomes and values such as the USDA, each of the Federal Reserve Banks, and others, but in our opinion, the most consistent and rigorously gathered is NCREIF.
Since past is prologue, and since we are reporting on positives in this blog, let’s try to look into the future. We believe the supply and demand picture in agriculture should continue to improve on a long-term basis: 1) There are more mouths to feed on this earth; 2) the supply of arable land is decreasing; 3) as incomes improve, caloric intake increases, especially meats; 4) food use as fuel continues to increase in spite of temporary setbacks; 5) although productivity of farmland continues to increase, it does so at a decreasing rate.
All seems to spell a good outlook for our farming future. And people like Bill Gates, George Soros, Jim Rogers and other famous investment gurus seem to agree as they too are buying agricultural properties around the world.
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