A recent analysis I read examined agricultural market trends with cash grain farmers. In that report, the analyst stated that:
- Since 2010 farms have faced increased costs of about 35%
- In 2014 the value of the cash grains they grow diminished by about 50%.
The increased cost is driven by the fact that two large companies control about 72% of the corn and soybean seed sales in the United States. Obviously, a lack of competition means they have exercised their pricing power.
As a result, the number of bankruptcies of farmers in the Midwest is increasing and land values in the Midwest have declined.
The good news for this segment of the agricultural industry is that there is a new company called Farmers Business Network Inc. It is a start-up that is selling a non-GMO but genetically enhanced seed, at prices that are significantly lower than the two major seed companies, Dow DuPont and Monsanto.
The founders of the new company are techies so they are utilizing technology to allow farmers to see the yields other farmers are enjoying from these new seeds. One farmer interviewed indicated he was converting all of his land to seed from this new company because he could be paying less for his seed and getting a higher price for the non-GMO crop.
It is critical to remember that land is the source of all wealth. Every product that we humans consume originates with land. Not all tracts of land are equal in quality and portfolio management requires every investor to hold some cash for liquidity. But historically, long term the best investment is land.