Touch the Soil News #327
You are probably wondering what overcapitalization of capitalism is. Simply, it means there are more investment dollars out there then there are investment opportunities. This situation has been fostered in part by the build-up of retirement plans by workers over the last 50 years. The Investment Company Institute recently reported that retirement assets in the U.S. were valued at $23.5 trillion. The total numbers of U.S. dollars looking for an investment are in excess of $84 trillion. But it is not just folks socking away for retirement that are giving Wall Street Interests trillions of dollars to go hunting for a return. There are other concentrations of capital that marshal trillions of dollars to scour the planet looking for a return.
These huge tsunamis of dollars show up when the U.S. Government (the public) is looking to borrow dollars. A week ago, when the U.S. Government was looking to borrow $55 billion for only 28 days, there was $181 billion lined up to loan it to the government. This means there was $3.3 dollars wanting to lend to the government for every $1 the government needed.
Midwest corn and soybean farms are are the focus of millions of dollars of investments looking for a return.
When the stock and bond markets can no longer absorb all the investment dollars out there – those dollars begin to look for other venues. In this vein, hundreds of millions of dollars are vying for farmland ownership – not just the farmers wanting to own land.
A case in point here is Farmland Partners, Inc. a Wall Street public company. They just purchased in one fell swoop – 118 farms totaling 22,100 acres near Paris, Illinois. Paris is a little community of less than 10,000 people in a rural area 165 miles south of Chicago.
Farmland Partners paid $197 million for these farms – or $8,900 per acre. Farmland Partners is now boasting that it is one of the largest owners of farmland in the Midwest. The thing is, is that these financial owners of farmland are not farmers – but want farmers to give them a return. According to Farmland Partners, Inc. CEO Paul Pittman, there are about $30 billion a year in farmland transactions in the U.S. which means there is no theoretical limit on how much Farmland Partners can grow.
Farmland Partners, Inc. is only two years old and it already controls 257 farms totaling 108,000 acres. Farmland Partners leases the farms they own back to farmers in the area. With hundreds of millions of investment dollars pouring into farmland – what will happen to the price of food?
So, not to get the wrong idea about Farmland Partners, Inc., they are but one of millions of enterprises that take dollars from private investors and attempt to do something with them. Is it their fault that our economic landscape has become overcapitalized?
Following is a short video clip featuring Farmland Partners CEO Paul Pittman: