Farmland provides both a cash yield and capital appreciation. It's a play on inflation and a rise in commodity prices, namely wheat, soybeans and corn. It's also often a family-run business, where families can control tens of thousands of acres. Why doesn't Buffett buy a few hundred thousand acres, or a million acres, across the country to further diversify Berkshire's earnings base? I believe it provides exposure and a hedge that, to a degree, is not provided by the other subs. Moreover, I feel many families would be more than happy to put their land in Berkshire's hands. Perhaps the argument goes that it wouldn't "move the needle" and even a million acres at 3,000 per acre is only 3 billion. Thoughts?
apologies - intended to post on berk board
Thoughts? Well it is a bit off topic for the board but then again traffic is light.I doubt WEB would buy the land directly it would be a huge spin up to become a farm baron. If you look at the return/acre the business would probably not be earnings positive for quite some time. Toss in that farming is not a stable cash flow generator. Useful tidbithttp://www.ers.usda.gov/AmberWaves/November07/DataFeature/What the above lays out is that there are more small hobby farms and more 1000+ acre farms while the number of mid-sized farms have shrunk. I feel many families would be more than happy to put their land in Berkshire's hands. Actually I doubt that. Families that are tied to the land have deep roots.jack
People tell stories that the Saudis are doing that quietly in Missouri. They are buying scrub lands, cutting down forest and harvesting the trees, and then grazing cattle on the resulting pasture land I here.This does exactly what you describe. The undeveloped land is less expensive than productive farm land. Grazing land/cattle gives a source of income to pay taxes while you wait for land values to escalate.Land is one of the best inflation hedges--especially if it is of some productive value.
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