by Monte Nevitt
We are firm believers in farming, and even stronger believers in farmland investment. At the same time, we recognize that on the other side of every reward is RISK; therefore utmost care is essential.
A good example of farmland investment becoming a strikeout is Morgan Stanley investing in the Ukraine. Having made mountains of money in 2006, MS decided to up the ante, and buy some of that world-famous Ukrainian black soil, so fertile it could grow anything, and so well-reputed that Hitler had his troops haul some back to Germany during WW II. After buying 11 large parcels of the black Ukrainian soil, Morgan Stanley hired a young Midwest farm boy with a long farming background as well as advanced schooling in farming. They hit the bull’s-eye.
The new MS farm manager loaded up several containers with John Deere tractors, combines, farm implements, seeds and fertilizers, and virtually anything needed upon arrival.
Then the surprises began. First, before the containers could unload, many licenses had to be purchased, and lots of grease was needed. Much of the seed and fertilizer soon disappeared, parts went missing, and officials insisted that MS build roads as well as farm fields. Within 2 years, Morgan Stanley’s farmland investment became history.
This is a reminder to us, when we hear tales of wealth generation in Ukraine, Brazil, Argentina, and third world countries, we might look in the mirror when seeking a good investment property. Although we don’t expect 20% rates of return, we also know nothing will be expropriated, we won’t be paying bribes at every turn, and we don’t worry about theft of all inputs as well as output.
For all the red tape, regulation, checks and balances -- it is hard to beat farming in the USA, where a man can invest his blood, sweat, tears, and resources with confidence that he will see a return, weather, lender, and markets permitting!
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