Wall Street Roots
Ceres Partners' Wall Street roots are evident in the firm's makeshift office in an old clapboard farmhouse that sits in the middle of cropland. Lucite tombstones resting on a shelf in a small room mark deals done by Brandon Zick, a former vice president of strategic acquisitions at Morgan Stanley's investment management unit. Vieth hired Zick in January to help analyze and manage farm purchases.

Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P 500 options. After a series of stints running an arbitrage team for Fuji Securities Inc. and other firms, he was hired as chief investment officer of fixed income at PanAgora, the quant firm, in 1999.

By about 2006, Vieth's concerns about the economy were mounting: Inflation was at a low, and the dollar had peaked as U.S. debt and deficits soared. So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts U.S. crop exports. Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres' point person with tenant farmers.

As the dollar fell 24% against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends. So, in late 2007, he founded Ceres, just as tightening credit markets began to push the global economy into a recession.

He named the firm Ceres for both the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago. "I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify," Vieth says. By May 2011, he had collected 17,238 acres, mostly in the Midwest.

When Vieth wants land, he goes shopping, as he did with Zick and Blum under a partly cloudy southern Michigan sky in May. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.

The trio drive by a 337-acre farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter. "Those trees will shade the corn and stunt growth," he says. Blum doesn't like the many rocks scattered on the unplanted dirt. Zick is skeptical that the bank will get its asking price of $7,000 an acre in a foreclosure sale.

The investors next visit a farmer they hired, Ed Kerlikowske Jr., who grows watermelon, peas and corn on a 782-acre spread near Berrien Springs, Mich. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that would otherwise be spent on land. "To really grow the business in today's economy, you need partners," Kerlikowske says as he passes around slices of fresh watermelon.

Possible Bubble
The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.

In March, then-FDIC Chairman Sheila Bair devoted a symposium to the topic in Washington with the participation of economists, bankers and agricultural experts. "If there is a bubble in farmland prices, I hope the bulk of any correction is borne by investors such as hedge funds and not by the banking industry," William Isaac, chairman of the FDIC during the farm banking bust and now senior managing director of FTI Consulting Inc., said during the event.
Greyson Colvin, who started the farming fund Colvin & Co. LLP in Anoka, Minn., in 2009, dismisses the idea of an overheated market. "After the housing bubble, people, are a little too quick to assign the word 'bubble' these days," says Colvin, whose two funds and separately managed accounts hold 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.