So many investors have rushed to capitalize on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20% in the first quarter compared with a year earlier.
"Yes, farmland will be a bubble again; all agricultural products will be in a bubble again," says Rogers, who is an investor in Agrifirma Brazil Ltd., a South American farmland owner.
A Safe Haven
Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers Holdings Inc. filed for bankruptcy in September of that year and the S&P 500 plunged 43% in the next six months. He purchased 8,000 acres in Uruguay, three smaller plots in southern Illinois and an 80-acre New Zealand kiwi-and-avocado orchard.
"We really thought all the investment banks would go under," says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. "Everyone said, 'Buy gold.' But at the end of the day, you can't eat it. If everything else goes and I just have these farms, it makes me moderately wealthy."
The hedge fund Diggle co-founded, Artradis Fund Management Pte in Singapore, suffered about $700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management Pte. Diggle plans to incorporate his five farms into an investment management group run by Vulpes.
From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he's witnessed aspiring locals eating their way up the food chain.
"You can see what a more prosperous China will consume," Diggle, 47, says. "It means more dairy, more meat-not just pork and chicken."
Investors find in farmland a respite from the cyclical price swings of the commodities market. Since 1970, there have been at least four price jumps of at least 100% that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of an acre of farmland tracked by the U.S. Department of Agriculture has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
"Farmland is the lowest-risk part of the value chain, but it's also a key part of production," says Jose Minaya, TIAA-CREF's head of natural resources and infrastructure investments.
In the U.K., where farm prices are also rising, one money manager traded his career at BlackRock Inc. for one in farming. Graham Birch, 51, left in 2009 as the London-based head of the natural resources team at BlackRock, the world's biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.
Birch, who says farming has suffered from a lack of investment and management talent, has spent $1 million on improvements. He now captures all of the effluent from his 600-cow herd, stores it in a 1-million-gallon steel tank and uses it as fertilizer for his crops. "At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do," Birch says.