They Never Stopped Making It

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

But “they” were making it. In fact, lots and lots of it.

According to data reported by the United Nations, the world’s farmable land base grew by about 240 million acres between 1971 and 1991, or the equivalent of all 1975 U.S. corn, soybeans, wheat, sorghum, and cotton acres combined.

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 nationwide in 1971 to nearly $1,000 an acre a decade later.

Then, with inflation and interest rates heading to the moon and grain prices heading back to the 1960s, the not-making-it-anymore crowd began to not make it anymore. U.S. land prices cracked in 1982, then plunged 40 percent in five years.

In late 1985, the still-bleeding ag economy pushed a reluctant President Ronald Reagan to sign into law the most expensive Farm Bill ever; its three-year cost was an estimated $52 billion. The White House also grudgingly signed a deal to bolster the crumbling Farm Credit System.

With the bruises of that hard beating still showing, however, farmers, farm bankers, and farm magazines soon began to chatter about how land prices had fallen enough to once again “cash-flow.” Most of the chats, discussions and stories ended with same old admonition of farmers everywhere: “… 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,” or nearly equal to America’s 1991 planted corn acreage.

Smack in the middle of that era, in Nov. 2001, the U.S. Department of Agriculture issued a report on the fast-awakening ag giants to America’s south, Brazil and Argentina, to “demystify” what it called “sensational media accounts of vast resource potential” of the two new grain exporters.

Demystify or not, the report contained hard numbers about each nation’s available-to-be-developed arable land that were, by any definition, pretty sensational.

“Brazil contains the world’s largest remaining tract of virgin land—an estimated 547 million hectares” or 1.35 billion acres—with “as much as one-fourth,” or 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 and 185 million hectares, respectively—where “as much as one-fourth… could be converted to grain and oilseed production under the right market signals.”

That’s another 200 million acres between the two.

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 in 2001 to a forecasted 107, 100, and 59 (again, respectively) 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 like rain forests, flood plains, and dryland savannas—to grow more crops when markets call for them.

All this comes to mind as another generation of hot-money sharpies, dazzled by a couple of years of fat per-acre returns in crop farming, gather wheelbarrows of investor money to buy farmland around the U.S. and, now, the world.

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?

© 2016 ag comm