A fine LA Times article on the global land grab

Investors seeing farmland as safer bet than stocks

Los Angeles Times | September 19, 2010

Wary of fluctuations on Wall Street, more wealthy Americans, private funds and foreigners are putting money into parcels of cornfields, fruit orchards and other U.S. agricultural products.

By P.J. Huffstutter, Los Angeles Times

Reporting from Kern County, Calif. — As investors tire of Wall Street’s roller coaster, more of them are plowing their money into land — farmland.

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Wealthy Americans and private funds alike are gobbling up Washington apple orchards, Illinois cornfields and Louisiana sugar plantations. So are foreigners. In California, investors from countries including Spain, Switzerland, China, Egypt and Iran collectively boosted their holdings 2.5% from February 2007 to February 2009 to 1.08 million acres — about 5% of the state’s total farmland. Overseas, U.S. and other investors are snapping up tens of millions of hectares of farmland in Africa, Central America and Eastern Europe.

Such investments generally involve a group of people who come together in a company or group of firms, pool their money and purchase parcels of land through a corporate structure. (Minimum investments can start around $25,000 and often require a commitment of at least six years.) After purchasing the land — whose value historically appreciates — it is usually then turned over to a farmer or a management firm, which handles day-to-day operations. If all goes well, investors can receive rent, proceeds from crop or livestock sales, or some combination of both.

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Optima Fund Management, a New York fund, plans to acquire about 10,000 acres of Arizona farmland and California vineyards by year’s end. Macquarie Agricultural Funds Management in Australia — which has invested in dairy, forestry and more than 7 million acres of land — is launching a second fund that may expand into Brazil. Pharos Financial Group, a firm backed by financier George Soros and based in Moscow, created an agriculture-focused private-equity fund in November and is scouting farms in Asia and Africa.

Such deals have sprouted a backlash and raised concerns of speculators becoming wealthy at the environmental and economic expense of local communities. John Peck, executive director of the anti-corporation advocacy group Family Farm Defenders, said institutional investors could distort global food production patterns by planting crops for profitability rather than nutrition.