Tag Archives: columnist
The Elbert Files: Now Is The Time To Sell Farmland
BY DAVE ELBERT , Columnist Friday, August 09, 2013 7:00 AM Iowa’s farm economy is at a tipping point. This won’t be a collapse, like the farm crisis of 30 years ago, when farmland lost 60 percent of its value and many farm families were put off their land. But there are growing signs that the farm economy has peaked. And if it has, the effects will be felt well beyond the farm gate. In recent years, record-high crop prices boosted Iowa’s per capita income growth to levels well above the national average, as well as state income tax collections. “Indeed, it is in the cards” that a decade of growth in farm income is coming to an end, said Neil Harl, Iowa’s premier agricultural expert. “These spikes never last forever,” Harl said last week. “Farmers are the world’s best economic citizens. Give them half an economic incentive, and they increase production every time and drive the price down, and destroy their own economic prosperity.” That is what is happening now. Corn and soybean prices reached record levels for the month of January, but they are now down significantly. Crop prices can, and do, fluctuate during the growing season. But the trend this year is abnormal. In recent years, crop prices have typically increased during the late spring and early summer months, based in part on early flooding and drought fears. Then in late summer and early fall, prices fell when government reports predicted larger-than-expected harvests due to advances in plant genetics, changing weather patterns and other factors. But this year, Iowa’s corn and soybean prices are bucking that trend. Corn prices are down 30 percent from January, while soybeans are down 15 percent. In the past 30 years, there have been only three other times – 1975, 1994 and 1999 – when both corn and soybeans posted double-digit price declines between January and July. In two cases, 1975 and 1994, year-end prices wound up being even lower than the July averages. Those earlier events occurred before significant genetic advances created drought-tolerant and fast-growing crops capable of making up the difference when planting is delayed by spring flooding. No one can predict with certainty what will happen this year, but at this point, it is unlikely that prices will recover to last year’s record levels. If corn and soybean prices remain where they are now, they would chop roughly $4 billion off the value of Iowa crops that sold for more than $20 billion last year. Indeed, current prices are more in line with 2010, which was also a good year for farm income, although not as good as the two years that followed. The problem today – and it’s not a bad problem to have – is that the bar of expectations has been repeatedly raised in recent years. Expectations are a big driver in farmland sales, pushing up land values by leaps and bounds not seen since the years that preceded the 1980s farm crisis. Harl and others say a 1980s-style crash is unlikely for a variety of reasons. But the question remains, have farmland values peaked? “We haven’t seen it yet,” said Steve Bruere, president of Clive-based Peoples Co., a major broker of farm sales. But he added, most farmland sales occur between September and March. “There is still so much money in checking accounts, and land values always lag going down,” Bruere said. Another factor, he said, is “interest rates have jumped about 1 percent.” “Eventually, the combination of lower prices and (higher) interest rates will affect land values,” Bruere said. If you own farmland and want to sell at the peak, now is probably a good time. Read more: http://www.businessr…6#ixzz2cPXNPHGh Continue reading
Thai Stocks Worth A Look, But Be Cautious
Tue Apr 16, 2013 3:24pm EDT (The author is a Reuters columnist and the opinions expressed are his own. For more from John Wasik see link.reuters.com/syk97s ) By John Wasik (Reuters) – Most emerging market talk focuses on BRICS – Brazil , Russia , India, China and South Africa – or maybe even TIMPs – Turkey , Indonesia, Mexico and the Philippines. But one sizzling emerging market that has not been adopted into an investing acronym is Thailand . Thailand has been growing rapidly relative to sluggish Western economies. Like its Southeast Asian cousins Indonesia , Singapore and Vietnam, Thailand has a relatively young population and a growing middle class, and it is building infrastructure along with a commodities trade. Thailand has had its political problems, including a coup, in recent years, but now it is focused on an export economy, driven by demand from China and India. Global investors are attracted to the country’s cornucopia of natural resources such as alumina, cocoa, gas, oil and sugar. Some 60 percent of the Thai gross domestic product is export-driven, which also consists of autos, rice and electronics. Thailand’s GDP rose by almost 20 percent in the fourth quarter of 2012 over that same period the year before, bringing growth for the full year to 6.4 percent, according to the Bank of Thailand , which on Friday raised its projected estimate of this year’s growth to 5.1 percent from 4.9 percent. Domestically, the Thai government is applying a Keynesian stimulus to the economy through large infrastructure projects, paying above-market prices to farmers and raising the minimum wage, according to Patricia Oey, an analyst for Morningstar . The country is a major agricultural supplier and manufacturer for the world’s most populous region. It’s not well known to most individual investors that Thailand has had one of the best-performing stock markets in the world during the past decade. Two closed-end funds that invest in Thailand offer the opportunity to get in on that growth: Thai Fund Inc and Thai Capital Fund. But I don’t recommend them because of their high annual expenses of 1.46 percent and 2.1 percent, respectively. Only one exchange-traded fund concentrates exclusively on Thailand: the iShares MSCI Thailand Capped Investible Market ETF, which has returned an annualized 27 percent in the three years through April 15. That compares to 5 percent for an Asia-Pacific (ex- Japan ) index. The fund’s annual expense ratio is 0.60 percent of assets. Some of the fund’s gains have been extraordinary: 81 percent in 2009, 57 percent in 2010 and 40 percent last year. It lost 4 percent in 2011, a sour year in general for U.S. stocks as well. That compares to a roughly 5 percent annualized gain during the past five years for the SPDR S&P 500 fund – an ETF representing the largest U.S. companies – and almost an 8 percent annualized gain over the decade through April 15. As a mostly passive vehicle tracking an index of Thai companies, the iShares fund employs a method for capturing 99 percent of the total value of the Thai stock market. The 90 stocks within the index include banks such as Siam Commercial Bank PCL, technology companies like Advanced Info Service PCL and energy companies such as PTT Exploration and Production PCL. While the fund is probably the most diversified and least expensive way to invest in Thailand, it has drawbacks. For one thing, investors have been pouring money into it. It has gone from $600 million in assets in November to more than $1 billion, says Todd Rosenbluth, director of ETF fund research for S&P Capital IQ in New York. That means you run the risk of picking a market that’s already too hot. The fund is also top-heavy in financial services stocks, representing some 40 percent of the portfolio. Overconcentration in any one sector always elevates portfolio risk. Indeed, the fund is so volatile that it has double the risk of the Standard & Poor’s 500-stock index – not unusual for a developing market but a consideration when you are making your investment choices. For instance, the fund may decline if China’s growth eases because all commodities producers will see lower demand for their output. Any reverberations will also sting. Remember the “Asian contagion” some 20 years ago? That sank Asian currencies – including the Thai baht – and stocks in short order, burning myriad investors. Beyond just volatility, there’s diversification to consider. It’s best to invest in a country like Thailand as part of a larger investment in all emerging markets, since any market can quickly turn south in today’s hyper-connected world. (Follow us @ReutersMoney or here Editing by Beth Pinsker, Lauren Young and Douglas Royalty) Continue reading
