Jim Rogers calls a next bubble in food again

[Camtender]

Re: Jim Rodgers calls the next bubble - Food

I've been listening to Jim Rogers pumping agricultural stocks every opportunity he gets on the MSM for at least the past couple of years. And while agricultural stocks have done pretty well, it was one sector that I couldn't bring myself to invest in. Not because I didn't think it would do well, but because I've been to a couple of third world countries and I know what a huge difference it can make when food prices rise by even a small amount. To me it's imoral to speculate on food stocks that will result in higher prices around the world - specifically 3rd world countries, even if my participation will be microscopic if barely even felt. That's where I personally draw the line. I didn't see the MENA riots coming, but I was able to sleep better knowing I had next to no involvement in that.

Two or three years ago when I first started to learn about all things macro-economics, I used to listen to Jim as often as possible and did learn a few things from him. I regarded him as a successful investor and someone who spoke against the MSM consensus, so I do have some respect for him even if EJ calls him the 'sound bite king' (and probably a 'presstitute'), but as simplistic as his calls are, they have been mostly right, although one can argue of what use they are when he nearly always refuses to give dates of when X trend will start/finish. These days if I see Jim videos, all I look for are any new sound-bites advising of new pattern changes, because that's about all I can get out of his videos now.

Cheers,
Adeptus

That is funny that EJ would say that about Jim because when I signed up and paid at Itulip for a year (a few years back), EJ promised a Roger's interview, anyone seen it????????

The reason Jim is redundant with what he says is because he is a true fundamentalist, "the price of "X" will always break a new record high" and "never buy when something is at it all time record high".

Until you understand that everything you currently need in life is inflating in value and everything you own (save any PMs) is deflating in value during this monetary collapse, Jim's message will not connect with you.

If past performance is indicative of future performance, I will take the side of the co-founder of the Quantum Fund.

[c1ue]

Re: Jim Rodgers calls the next bubble - Food

Farming today is a "play" on many themes:

1) growing world population (IIRC about 93 million more per year)

This might be more credible if this trend had not been true for the last 50,000 years. Why is this suddenly so much more important now?

2) increasing demand for meat products (3 - 7 grain inputs per 1 meat output)

I've seen this talking point before; the problem is that high prices mean the reverse: 3x to 7x as much caloric intake for meat substitution. Or in other words: 20 million impoverished unemployed Americans could make up for 60 million to 140 million 3rd world people raising their caloric intake.

3) decreasing advances in yields per science inputs (down to less than 1%/yr)

True, but world population now is increasing only 1.14% (and falling). If you extrapolate the present agricultural surplus, it will be decades before pure population growth becomes an issue vis a vis food supply

4) priority of fuel allocation in peak oil (starving people bring down governments)

Unclear why this is in support of your point. Starving people will demand the end to subsidies for fuel biomass.

5) shrinking arable land available for crop conversion

This is another common talking point which bears no resemblence to reality.

Yes, cities are growing faster recently.

But farms have been shrinking for generations.

Check out the historical survey data here:

http://coweeta.uga.edu/trends/

3 examples:

state	county	year	acre
Oregon	Benton	1900	235652
Oregon	Benton	1910	235504
Oregon	Benton	1920	233427
Oregon	Benton	1930	222253
Oregon	Benton	1940	221054
Oregon	Benton	1950	230452
Oregon	Benton	1954	214000
Oregon	Benton	1958	205000
Oregon	Benton	1969	129000
Oregon	Benton	1974	130000
Oregon	Benton	1982	123000
Oregon	Benton	1987	124792
Oregon	Benton	1997	131000
Maryland	Howard	1880	122184
Maryland	Howard	1900	146039
Maryland	Howard	1910	149052
Maryland	Howard	1920	142400
Maryland	Howard	1930	128837
Maryland	Howard	1940	123785
Maryland	Howard	1950	122999
Maryland	Howard	1954	120000
Maryland	Howard	1958	96000
Maryland	Howard	1969	76000
Maryland	Howard	1974	65000
Maryland	Howard	1982	55000
Maryland	Howard	1987	54041
Maryland	Howard	1997	40000
California	San Bernardino	1880	168821
California	San Bernardino	1900	219132
California	San Bernardino	1910	208396
California	San Bernardino	1920	415738
California	San Bernardino	1930	295748
California	San Bernardino	1940	714584
California	San Bernardino	1950	642227
California	San Bernardino	1954	1601000
California	San Bernardino	1958	929000
California	San Bernardino	1969	2108000
California	San Bernardino	1974	2386000
California	San Bernardino	1982	2121000
California	San Bernardino	1987	1682364
California	San Bernardino	1997	924000

Notice that the 'decrease' you speak of has been going on for literally generations. Why again is it an issue now?

6) shrinking water tables in heavily groundpumped farmlands (Ogalalla Aquafier as example)

This is a real issue, but again it depends on the area. In California, the reservoirs were very, very low for literally decades...until last year.

7) as throughout time, it is a "necessity" and part of the FEW (food, energy, water)

True, but only if insufficient supply. For oil, it seems fairly clear that we're at that stage where marginal changes in demand or supply result in price changes. Not at all clear this is true for food overall, though there are exceptions.

8) food is now being used for fuel (as ridiculous as we all think that is)

Yes, but only in the United States, and only due to massive subsidies. Either we get really expensive oil very soon, or else the budget situation will resolve the subsidy issue.

9) changing or erratic weather patterns affecting harvests reduce world outputs of grains

This is another idiotic meme. Weather has been affecting crops forever.

It isn't anything new.

just a few things to think about before you pan ag as an investment.

I didn't pan ag as a terrible investment. I pointed out that ag land has a strong dependency on credit both for the land price itself and as a production input.

None of your points above addressed this issue.

[cjppjc]

Re: Jim Rodgers calls the next bubble - Food

Doom & Gloom. It would be smarter to just sell the farm, then to

[LargoWinch]

Re: Jim Rodgers calls the next bubble - Food

Doom & Gloom. It would be smarter to just sell the farm, then to

cjppjc, are you responding to c1ue's post or another comment made in this thread (I am not sure to follow friend!)?

[cjppjc]

Re: Jim Rodgers calls the next bubble - Food

cjppjc, are you responding to c1ue's post or another comment made in this thread (I am not sure to follow friend!)?

I was suggesting to Doom & Gloom it would be easier, and in the long run better for his health to sell the farm, than go down the long road that leads to C1ue's door.

[LargoWinch]

Re: Jim Rodgers calls the next bubble - Food

I was suggesting to Doom & Gloom it would be easier, and in the long run better for his health to sell the farm, than go down the long road that leads to C1ue's door.

I agree with your support of c1ue's rationale. Give me a month on any farm and everything would be "not suited" for human consumption.

[leegs]

Re: Jim Rodgers calls the next bubble - Food

I agree with your support of c1ue's rationale. Give me a month on any farm and everything would be "not suited" for human consumption.

Somehow I don't think he was talking about c1ue's 'rationale', rather I think he was suggesting that Doom not get caught up in a debate (on anything) with him. We all know how that goes.

(BTW no disrespect meant to c1ue)

[Southernguy]

Re: Jim Rodgers calls the next bubble - Food

In Uruguay land prices evolved 448 to 2633 dollars per hectare that is, 2000 to 2010. Annual cumulative more or less 50%
If you take an anomalous period, that is, from 2002 to 2010, then difference is even bigger; that is rate of growth is 73% annual.
Between 2000 and 2010, had you rented the land you would have received about 640 dollars per hectare in rent before taxes. Taxes being very low, you can estimate not less than 500 dollars in rent per hectare, net of taxes.
But, of course, you have the lowest interest rates in history.
Once interest rates go up again (everything that goes down rises eventualy) I expect land prices to go down.
Buying land in Uruguay would have been a much better investment than gold from 2002 to 2010.
Of course, had you personally, I mean, as an entrepreneur, worked the land, returns would have been, being reasonably profficient, much higher.
That said, I would not recommend to buy land in Uruguay now.
And, of course, a New Zealand venture, New Zealand farming systems Uruguay bought large swaths of land here some 5 years ago to use them to produce milk: they lost a lot of money, had to sell big chunk of the land and are still losing a lot of money. Things are some times more difficult than they seem to be.

[LargoWinch]

Re: Jim Rodgers calls the next bubble - Food

Somehow I don't think he was talking about c1ue's 'rationale', rather I think he was suggesting that Doom not get caught up in a debate (on anything) with him. We all know how that goes.

(BTW no disrespect meant to c1ue)

My bad then. Regardless, I do support c1ue's view so far on Ag.

[cjppjc]

Re: Jim Rodgers calls the next bubble - Food

My bad then. Regardless, I do support c1ue's view so far on Ag.

Yes, you missed it.

Kiss the baby often. It cannot be done too much. Sooner than you wish the day will come when he wont let you.

[doom&gloom]

Re: Jim Rodgers calls the next bubble - Food

In Uruguay land prices evolved 448 to 2633 dollars per hectare that is, 2000 to 2010. Annual cumulative more or less 50%
If you take an anomalous period, that is, from 2002 to 2010, then difference is even bigger; that is rate of growth is 73% annual.
Between 2000 and 2010, had you rented the land you would have received about 640 dollars per hectare in rent before taxes. Taxes being very low, you can estimate not less than 500 dollars in rent per hectare, net of taxes.
But, of course, you have the lowest interest rates in history.
Once interest rates go up again (everything that goes down rises eventualy) I expect land prices to go down.
Buying land in Uruguay would have been a much better investment than gold from 2002 to 2010.
Of course, had you personally, I mean, as an entrepreneur, worked the land, returns would have been, being reasonably profficient, much higher.
That said, I would not recommend to buy land in Uruguay now.
And, of course, a New Zealand venture, New Zealand farming systems Uruguay bought large swaths of land here some 5 years ago to use them to produce milk: they lost a lot of money, had to sell big chunk of the land and are still losing a lot of money. Things are some times more difficult than they seem to be.

wow, someone who knows something about uruguay, congrats! srsly! are living in-country? if so, are you in ag?

uruguay land prices have evolved up primarily because they have determined the quality of the land for growing crops on it. Much of what now supports industrial ag was cattle pasture for decades if not over a hundred years. there are still plenty of farms being converted from cows to grain production. and you can still buy land at maybe $500/ha, but that will be only suitable to run cows upon.

The "good" farmland there is still a much better buy than similar land in the US by far. It is, of course, also a way to internationalize out of the US in a country with strong ownership rights for foreigners. Not many have such rights.

In my particular case, I am "running the land" and do not need credit, so I could care less what the credit markets do, only what the input costs and output returns are. If credit markets drive out marginal producers it is only better for me in the end, though that is not one of my points of analysis or hopes per se.

But beyond that, I see this little part of the world as a 'safe haven' in the event currency wars lead to trade wars lead to real wars as Gerald Celente would say. Certainly it is beyond the kleptocaratic scope of the US government, and in a land with low taxes (for a "socialist" country) in a nice part of the world. I would have no problem living there whatsoever.

[doom&gloom]

Re: Jim Rodgers calls the next bubble - Food

for simplicity's sake, responses in bold below...

This might be more credible if this trend had not been true for the last 50,000 years. Why is this suddenly so much more important now?

There are limits to growth...

I've seen this talking point before; the problem is that high prices mean the reverse: 3x to 7x as much caloric intake for meat substitution. Or in other words: 20 million impoverished unemployed Americans could make up for 60 million to 140 million 3rd world people raising their caloric intake.

perhaps but they still gotta eat, and people used to meat diets do not suddely become rice consumers, they try to get even cheap protien into themselves.

True, but world population now is increasing only 1.14% (and falling). If you extrapolate the present agricultural surplus, it will be decades before pure population growth becomes an issue vis a vis food supply

not necessarily when other factors like water, credit etc come into play.

Unclear why this is in support of your point. Starving people will demand the end to subsidies for fuel biomass.

Starving peole demand food. "resources" will be allocated by governments to ensure food is procured. be it oil, money, whatever.

This is another common talking point which bears no resemblence to reality.

Yes, cities are growing faster recently.

But farms have been shrinking for generations.

Check out the historical survey data here:

*snip for brevity*

3 examples:

Notice that the 'decrease' you speak of has been going on for literally generations. Why again is it an issue now?

Partly because yields are no longer increasing near exponentially as they had previously. Keep in mind that not too long ago much farming was near sustinence, with people growing on marginal land because that was all they had. Marginal land moves out of production, or even good land gets paved over. that land is just plain lost to outputs either way. in a dynamic system with mutiple wheels, you are stabbing at simplufying something that is much more complex.

This is a real issue, but again it depends on the area. In California, the reservoirs were very, very low for literally decades...until last year.

Yes, it IS a real issue. Water has been pegged as one of the more pressing issues in the future. Farmland is a huge consumer of water. We are watching some parts of the US literally dry up, no "buts" about it. We shall see more of that happening over time. And not just here. Water allocation in the Nile Delta is leaving some land dry, the mexicans get almost nothing from the Colorado river anymore, etc. Michael Klare did a nice job of covering some of this in his book Resource Wars -- I suggest you try it.


True, but only if insufficient supply. For oil, it seems fairly clear that we're at that stage where marginal changes in demand or supply result in price changes. Not at all clear this is true for food overall, though there are exceptions.

Marginal canges in oil price AND availability will lead to marginal decreases in food at times and in various places. this is nothing new. Peak oil will most probably exascerbate it.

Yes, but only in the United States, and only due to massive subsidies. Either we get really expensive oil very soon, or else the budget situation will resolve the subsidy issue.

WRONG. try again: http://oilprice.com/Latest-Energy-Ne...-for-2011.html

This is another idiotic meme. Weather has been affecting crops forever.

Yes it has. Sometimes it is not so bad, sometimes it is very bad. Like recent flooding and drought in the US. Or Russia losing much of their wheat a few years ago. There are cyclical patterns in weather that may be caused by AGW, but more probably are caused by changes in ocean currents that may be affected by the sunspots or who knows what else.


I didn't pan ag as a terrible investment. I pointed out that ag land has a strong dependency on credit both for the land price itself and as a production input.

None of your points above addressed this issue.

In my particular case, and excuse me for erhaps misinterpreting your position, none of that makes any difference to me.

[doom&gloom]

Re: Jim Rodgers calls the next bubble - Food

for simplicity's sake, responses in bold below...

Addendum:

http://www.chrismartenson.com/blog/c...t-higher/62178
Chris Martenson discusses growth and commodity prices

[shiny!]

Re: Jim Rodgers calls the next bubble - Food

In the 80's farmers were leveraged beyond their eyeballs in the US. that is not the case now. I believe (last I recall seeing) the avge farmer was carrying about 7% debt or so. They learned from the 80's. Farmers are not the dumb rednecks so many seem to think they are...

I remember reading an article in National Geographic back in the 80's about the plight of over-indebted independent farmers. It described one farmer with a small plot of acreage who was surrounded by big farms. All of his neighbors had purchased massive, expensive farm equipment on credit. They were going under. He, OTOH, used a team of Percheron horses dragging a plow. He grew the horses' food and used their exhaust as fertilizer. He was the only farmer in his area turning a profit.

Things have changed dramatically since then. Big Ag has bought out many of those independent farms. The government tilts agriculture policy in favor of Big Ag and away from small organic farmers. But still, there's a lesson in there somewhere.

[lakedaemonian]

Re: Jim Rodgers calls the next bubble - Food

I remember reading an article in National Geographic back in the 80's about the plight of over-indebted independent farmers. It described one farmer with a small plot of acreage who was surrounded by big farms. All of his neighbors had purchased massive, expensive farm equipment on credit. They were going under. He, OTOH, used a team of Percheron horses dragging a plow. He grew the horses' food and used their exhaust as fertilizer. He was the only farmer in his area turning a profit.

Things have changed dramatically since then. Big Ag has bought out many of those independent farms. The government tilts agriculture policy in favor of Big Ag and away from small organic farmers. But still, there's a lesson in there somewhere.

The lessons I learned with farming is that it's possible to make BIG money in farming.

Riding the cheap credit wave and/or focusing like a laser on low energy input farming.

We bought our farm as the cheap credit tide was rising...and recently sold with the incoming 2nd surge of less cheap credit into the industry.

We learned some very valuable lessons a couple years ago when Ag prices and credit collapsed.

Farm income crashed and bank managers went from throwing money at farmers to managing distressed farm properties.

My perception of farm property is a bit like a movie theatre....we sold in what we believe is the period between the 2nd and 3rd act of the movie.....we didn't want to get jammed in a crowded exit once the "movie" is over.

Could the movie be a double feature?

Absolutely......but we reckon we'd rather sit on the sidelines until we have more clarity in the market......I'm quite fearful that, particularly in NZ, we may be susceptible to a farm credit problem since we "import" a lot of our credit from the likes of Japan and China.

Things are tough for Japan and likely to get tougher.....and while NZ's foreign credit patrons have shifted more towards China....once China suffers it's economic turbulence how that will play out for NZ's foreign credit dependence is unknown but possibly quite negative.

EJ has begun discussing the potential problem arising from trying to achieve maximum return for gold when it approaches it's future peak when the exit begins to crowd....just imagine how much more difficult that problem is for such an illiquid asset like agricultural land.

I've seen a period where ag land sold before it even reached the market the frenzy has gone so high...and I've seen land languishing for years with the bank calling the shots but desperate to keep from it going into foreclosure and the circling of vultures.

I know bank managers down here working full time on nothing but troubled farms drowning in cheap credit up to their eyeballs in debt....it could be a nasty unwind requiring national support.

The other side is energy inputs.

How much energy does it take to produce ag?

I don't think, I KNOW, that farmers who own low energy input farming operations will be far better off moving forward.

We chose the lowest cost(to reduce our need on temporarily cheap credit) basis land in one of the lowest energy input modern agricultural economies to ensure we would have a better chance to compete and ride out the volatility.

It was a successful basic plan...especially when we saw how our cheap(at the time) pasture fared so well against US dairy farming operations where the energy inputs are so high it's a bit like pouring crude oil down the neck of dairy cows.

No wonder US dairy farmers have gone broke in recent years.....it really is like farming in a Wal Mart parking lot ...when energy started getting expensive...and before dairy prices could respond....energy intensive dairy farming was like selling dollars for 0.50c......which is no way to try and make money.