Defining The Disruptive Geopolitics Of The Global Farms Race
February 17th, 2022
Via GuruFocus, a look at how Bill Gates has acquired over 269,000 acres of farmland, making him the largest private farmland owner in the US based on a Land Report study:
Today’s world population is close to 7.9 billion people, with approximately 1 billion of those people already going hungry. The UN estimates the world will have another 2 billion people by 2050, and thus will require a 60% increase in food supply.
This increase in food demand is also being driven by growing affluence as the world’s increasing middle class tends to demand for more foods rich in meat and dairy. Then there are Biofuels, which burn crops for fuel, that don’t contribute to the global food supply but still require farmland to produce.
Farmland: The next great investment opportunity?
The majority of food production requires farmland. Thus, an expected increase in the demand for food should increase the value of farmland. Most investors tend to flock to more profitable types of land, staying away from the less profitable farmland, but the expected increase in the world population combined with climate change could create an increasing food shortage, driving the price of farmland up faster than in the past.
According to the U.S. Department of Agriculture, the U.S. farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,380 per acre for 2021, up $220 per acre, or 7.0%, from 2020. This is a sharp increase from the growth rate in prior years of approximately 4.5%.
Gates’ latest investing spree
According to a recent Land Report, Microsoft (MSFT, Financial) co-founder Bill Gates (Trades, Portfolio) has acquired over 269,000 acres of farmland in the U.S., greater than any other private individual. His portfolio includes farmland in 20 states which grow vegetables such as soybeans, carrots and even potatoes (of which some end up in McDonalds (MCD, Financial) fries).
Gates has a total of 269,000 acres, which is a lot for one person but still just a small part of the 911 million acres of farmland estimated to be in the U.S. Thus, there is no need to worry about the Gates family having a monopoly on food just yet. Gates purchased the land via Washington-based Cascade Investments and a number of shell companies rather than via his charitable foundation.
Farmland stocks
A quick review of the most recent stock purchases by the Bill and Melinda Gates Foundation show a series of farmland-related purchases as well. Investors who are interested in farmland investing but who don’t want to go out and buy farmland may want to consider these opportunities. Gates’ farmland stocks include:
Sanderson Farms Inc. (SAFM, Financial)
This is the third-largest poultry producer in the U.S. and produces a jaw-dropping 13.65 million chickens per week. In the 2021 fourth quarter when the Gates Foundation established this position, shares traded for an average price of $188.
In the most recent quarter, the Gates foundation bought shares in this agricultrual machinery giant for average of $360.
This company is a leader in agricultural and construction machinery. The Gates Foundation was buying for an average price of $208 per share in the fourth quarter.
Final thoughts
Bill Gates (Trades, Portfolio) and many other successful investors are buying up huge chunks of farmland as food shortages are expected to increase in the future. As an asset class, farmland has returned between 4% and 7% historically. With the demand for food supply increasing as the population grows and with land being in scarce supply, it seems like a great defensive investment for the long term, even if it isn’t yet producing the same kind of gains as residential land.
This entry was posted on Thursday, February 17th, 2022 at 1:22 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land. Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas. Monty writes about freshwater scarcity issues at www.waterpolitics.com and frontier investment markets at www.wildcatsandblacksheep.com.