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Farmland. They never stopped making it

Forty-five years ago, anyone in agriculture was offered the same advice: “Buy land; they’re not making it anymore.”

But “they” were making it, lots of it.

According to United Nations data, the world’s farmable land base grew by about 240 million acres between 1971 and 1991.

The “not-making-it-anymore” believers, however, plunged ahead and U.S. land prices quintupled during the go-go 1970s, from about $200 an acre (C$254) nationwide in 1971 to nearly $1,000 an acre (C$1,268) a decade later.

Then, with inflation and interest rates heading to the moon and grain prices dropping, the not-making-it-anymore crowd began to not make it. U.S. land prices cracked in 1982, plunging 40 per cent by 1987.

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In late 1985, the still-bleeding ag economy pushed a reluctant President Reagan to sign the most expensive Farm Bill ever and a deal to bolster the Farm Credit System.

With the bruises still showing, however, the chatter soon began about how land prices had fallen enough to once again “cash flow” and adding “… besides, they’re not making it anymore.”

But “they” were — still. Between 1991 and 2011, according to the United Nations, “global cropland grew by 78 million acres.”

Smack in the middle of that, in Nov. 2001, the U.S. Department of Agriculture issued a report on Brazil and Argentina, to “demystify” what it called “sensational media accounts of vast resource potential” of the two.

The report contained hard numbers that were, by any definition, pretty sensational.

“Brazil contains the world’s largest remaining tract of virgin land — an estimated 1.35 billion acres — with about 335 million acres, “readily convertible to agricultural activity.”

And, USDA added, “… both Argentina and Brazil have huge areas under permanent pasture — an estimated 142.5 million and 185 million hectares, respectively — where “as much as one-fourth… could be converted to grain and oilseed production…”

That’s another 200 million acres.

The market signals — chiefly price, but demand, too — were quickly given and, just as quickly, received. According to USDA, American, Brazilian, and Argentine soybean production, in million metric tons, grew (respectively) from 75.4, 35.0, and 26.0 in 2001 to a forecasted 107, 100, and 59 by 2016.

So, no, “they’re” not “making” any more land but profit-driven farmers here, there and almost everywhere have, for generations, found more acres — often millions more and often in delicate ecosystems — to grow more crops when markets ask.

All this comes to mind as another generation of hot-money sharpies, dazzled by a couple of years of fat returns in crops, gather wheelbarrows of investor money to buy farmland.

The amount of land and the per-acre price they are paying, given today’s substantially lower commodity prices, however, not only look suspiciously high, most appear to be tied to little more than the fact “that they’re not making it anymore.”

But that’s not a fact, is it?

The Farm and Food File is published weekly through the U.S. and Canada www.farmandfoodfile.com.

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