The Next Bubble?

The Economist thinks prices for farmland are getting out of hand:

Tobias Levkovich, an equity strategist with Citigroup, thinks investors have been seduced by the bulls’ “everyone’s got to eat” mantra and are ignoring the warning signs, just as they did with the housing market in 2005-06. In an uncomfortable echo of that boom-turned-bust, land prices in America have deviated dramatically from their long-term growth rate (see chart). In relation to farm cash flows, they are now much higher even that they were in the late 1970s, the last golden age for ploughmen. The ratio of prices to cash-rent rates—the farming equivalent of the price-earnings multiple on stockmarkets—looks frothy too.

The previous decline in farmland prices in the mid-1980s set the stage for quite a few developers to make fortunes by securing property on the cheap.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: