investing in farmland

Why Jim Rogers is Investing in Farmland

Legendary Wall Street trader and best-selling author Jim Rogers recently offered this unconventional advice: If you want to get rich, you should be investing in farmland.

Don't laugh. Rogers is good at what he does. Really good.

Together with George Soros, he founded the Quantum Fund in the 1970s and posted returns of 4,200% over 10 years. Rogers retired in 1980 at the age of 37, but is still active as a private investor.

Back in 1999, Jim Rogers recommended gold when it was trading at $252 and silver at $4. You know what happened after that.

Now Rogers thinks investing in farmland will pay off in a big way.

"It's the farmers, the producers, who are going to be in the captain's seat when the prices go through the roof," he told The Australian Financial Review.

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Investing in Farmland: How to Turn Healthy Profits From the Heartland

If Mark Twain was talking about investing in farmland when he suggested "buy land - they're not making anymore," then he knew more about finance than he's credited with.

The Federal Reserve Bank of Chicago just reported that prime farmland prices in the heart of the U.S. grain belt (Indiana, Illinois, Iowa, Michigan and Wisconsin) - were up 17% in the second quarter compared to 2010, the biggest year-over-year increase since 1977.

That's on top of a 12% jump for all of 2010, the second-largest yearly increase in the past 30 years.

In fact, farmland value since 2000 has appreciated by more than 1,200%, according to the National Council of Real Estate Investment Fiduciaries (NCREIF), and netted nice profits for farmland investors.

Just look at the NCREIF's Farmland Returns Index, which measures the quarterly performance of a large pool of individual agricultural properties acquired in the private market for investment purposes.

The index has posted some incredible quarterly gains over the past decade - most notably 22.78% and 14.63% in the fourth quarters of 2005 and 2004, respectively.

Farmland gains for the first two quarters of 2011 were recently reported at 2.40% and 1.48%.

What's more, negative quarterly returns for farmland are extremely rare. Only once since 1992 has the NCREIF Index fallen period-over-period, and that came in the fourth quarter of 2001 amid post-9/11 economic turmoil.

Given the large value gains since 2000, a lot of potential has been realized, but there's plenty of room for future profit.

"It's not the first inning of the game," Shonda Warner, managing partner at Chess Ag Full Harvest Partners, told CNBC, "but it's not the eighth inning either."



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