If you want to become rich, Jim Rogers, investment whiz, best-selling author and one of Wall Street's towering personalities, has this advice: Become a farmer. Food prices have been high recently. Some have questioned how long that can continue. Not Rogers. He predicts that farming incomes will rise dramatically in the next few decades, faster than those in most other industries — even Wall Street. The essence of his argument is this: We don't need more bankers. What we need are more farmers. The invisible hand will do its magic. "The world has got a serious food problem," says Rogers. "The only real way to solve it is to draw more people back to agriculture."
It's been decades since the American heartland has been a money pump and longer since farming was a major source of employment. Old rural towns have emptied as families — and the U.S. — have moved on. Technology, service jobs and finance have been the basis of the economy since at least the 1980s. Farming became the economic equivalent of a protected species — supported by a mix of government handouts, lax regulation (agriculture is one of the few industries shielded from certain child-labor laws) and charity concerts.
(See pictures of urban farming around the world.)But in the past few years, thanks to a wealthier (and hungrier) emerging-market middle class and a boom in biofuels, the business of growing has once again become a growth business. At a time when the overall economy is limping along at an anemic growth rate of 1.9%, net farm income was up 27% last year and is expected to jump another 20% in 2011. Real estate prices in general are again falling this year. But according to the Federal Reserve, the average farm has doubled in value in the past six years. Farmland is quickly emerging as one of the year's hottest investments on Wall Street. "We've been doing this for a number of years, long before anyone thought this was sexy," says Jeff Conrad, who heads Hancock Agricultural Investment Group. "Now we are getting a lot of calls, and we are noticing more competition. There's a lot of interest in New York."
These days, a trip to Grand Island, Neb., a city of 48,500 surrounded by farms, is a trip to an economic bizarro land. Business is booming. None of the half-dozen or so local banks in town have failed or even come close to failing. In fact, profits are up. "A lot of local banks are sitting with a lot of cash," says Colby Collins, Grand Island branch manager for Five Points Bank. The largest local manufacturing plant, which makes combine harvesters, is at full capacity. Case IH plant manager Bill Baasch has hired 130 workers in the past nine months. Sales at Global Industries, a company based in Grand Island that makes grain-storage bins and other building materials, are up 130% since 2003. Tom Dinsdale, who owns the local General Motors car dealership, says 2010 was the best year he's ever had. Customers who would normally buy a Chevy Suburban are buying a Cadillac Escalade. Dinsdale is adding an infinity pool to his nearby riverfront second home. "Business is good," he says.
Even housing has done well in the past few years. Realtor Lisa Crumrine says her office has sold 48 homes in Grand Island in 2011 and that prices are up slightly. Greg Baxter, a cattle rancher and real estate developer, says he has sold six lots so far this year in a development just off Grand Island's commercial strip. Local homebuilders are busy constructing custom homes on the properties. That's one reason Nebraska's unemployment rate is 4.1%, the second lowest in the country behind that of mining-heavy North Dakota. Iowa's unemployment rate is a slightly higher 6%, still far lower than California's 11.7%, New York's 7.9% or the national average of 9.1%.
(See TIME's photo-essay "Nebraskaland: A Tale of Two Farms.")Even with the recent uptick, however, agriculture accounts for only 1% of U.S. GDP. Add in all those other things that are part of the farm economy — tractors, fertilizer, seeds — and you still get to only about 4%. That's smaller than real estate — about 13% — and far smaller than the nation's service sector, which makes up about 70% of the economy. As Jamie Dimon, head of JPMorgan Chase, tells TIME, "We don't make up what we lose to the world in buying oil by selling them corn."
But some experts believe agriculture can do more to fuel job growth. Chuck Fluharty of the Rural Policy Research Institute at the University of Missouri sees a possible renaissance in farm towns. As money flows back into those areas, he predicts, farmers will need somewhere to invest. As they did with ethanol, he says, farmers will put their money in new industries that will create uses for their crops, like biodegradable plastics or other kinds of biofuels. The result will be more jobs. "Agriculture is the most critical story in our economy today," says Fluharty. "It will affect the future of the world."
The main reason for U.S. farmers' unlikely recovery is as familiar as the outcome is foreign. Wealthier consumers in places like China and India are eating more, and in particular they are eating more meat. The average American consumes about 250 lb. (113 kg) of meat a year. The average Indian eats less than 10 lb. (4.5 kg) a year. In China, it's more like 100 lb. (45 kg). Which means there's a lot of room for growth. Half of U.S. corn production goes to feed cattle, pigs and poultry, which drives up demand for grain. Ethanol has increased the demand for corn as well. As a result of both trends, corn prices have more than doubled in the past year, to a recent $6.81 a bushel. Soybeans, which are the U.S.'s largest farm export to China, are up too.
Meanwhile, a number of innovations have made U.S. farmers significantly more productive than they were just two decades ago. Bioengineered seeds mean they can use smaller amounts of pesticides and water. And with GPS-aided, computer-monitored planting, some farmers are able to squeeze two rows in a space not much bigger than what used to fit only one. An average acre produced 91 bushels of corn in 1980; it now produces 152. That, along with higher prices, is boosting profits and making farmland dramatically more valuable — and farmers richer.
(See pictures of the world's harvest.)
Ken Woitaszewski knows what it's like to lose the farm. In 1985 he got a call saying the bank was about to foreclose on his family's 500 acres (200 hectares) in Wood River, Neb. He was 24, married and living in a trailer. It had been years since his father's farm was able to support the family. He and his three brothers did odd jobs. Woitaszewski worked on other people's farms. He assembled farm equipment for a dealer. Two of his brothers drilled wells and installed pivots, the long-boom sprinkler systems that water most farms. Another worked as a plumber.
Woitaszewski says he had no idea how much financial trouble his father was in. "My father was very old school," he says. "Today's farmer is much more open-minded." But it was the 1980s, and rising interest rates were spelling an end to many family farms. Pooling their money, the brothers found they could save only a so-called quarter section, or 160 acres (65 hectares), of the family's land. That was the seed of their rebound. "Losing the family's land to the bank was an important experience," says Woitaszewski. "I remember lying in my trailer thinking, I will do whatever it takes not to let that happen again."
The first few years were rough for Woitaszewski. Crop prices were low, and farm profits were nonexistent. He and his brothers had to hold on to their odd jobs. To keep the farm afloat, they ran it as cheaply as possible. They built their own barns and fixed up old tractors. But as more people ran into trouble, more farms became available. Woitaszewski says an experienced farmer once told him the best way to not lose your farm to the bank is to pay for it in cash. "We were lucky," says Woitaszewski. "We didn't have a lot of equity, so we couldn't do a lot of borrowing." In 1990 the brothers bought another 120 acres and then 40 more in 1994. By then, prices had risen to nearly $2,000 an acre (almost $5,000 per hectare).
(See how the poor are getting poorer in California's rich farm country.)
Woitaszewski and two of his brothers now farm 10,000 acres (4,000 hectares), about 60% of which they own. At the current average price of about $4,000 an acre (just under $10,000 a hectare) in Nebraska, the Woitaszewskis' land alone is worth $24 million. Back-of-the-envelope math suggests profits this year could be as high as $6 million, though Woitaszewski doubts they will hit that mark. Nonetheless, he seems somewhat amazed by his success. "We as humans possess more ability than we give ourselves credit for," he says.
John Willoughby, who owns 2,000 acres (800 hectares) in Wood River, got his start in farming in 1992, when his father-in-law retired. At the time he made the switch, he worked for a bank, and most of his clients — farmers — thought he was crazy. Today the move seems to have paid off. He expects his profits to be up 25% this year, and that's on top of a number of good years. A few years ago, he and his wife built a five-bedroom, five-bathroom home. They have four daughters, and Willoughby hopes to be able to send all of them to college nearly debt-free.
Most of the money he makes, though, goes back into his farm to pay down debt or buy new equipment. Willoughby says he has seen a lot of new grain bins go up on nearby farms this year. Last summer he spent $220,000 on a new tractor. He also bought a new grain bin ($60,000) and recently a new sprayer ($30,000) to spread herbicides. But the last time he bought land was three years ago, when he picked up 160 acres (65 hectares). Like other farmers, Willoughby says he is a pretty conservative businessperson. To him, land prices seem high. "It was hard to earn money for a number of years," says Willoughby. "I'm not going to waste it."
Already, the prosperity of farmers, along with rising concerns about U.S. debt, is changing the debate in Washington about agriculture. In early June, the Senate voted overwhelmingly to end tax credits and trade protections that benefit the corn-based ethanol industry. Although few think a complete ban will make it through both houses of Congress, many believe Washington is likely to curb its support of ethanol — long thought to be untouchable because of its popularity in Iowa.
(See the problem with factory farms.)
The real fight will be over the farm bill, which is up for renewal next year. The legislation, which was last passed in 2008, features $19 billion in subsidies for farmers, including $8 billion in direct payments. Some have long opposed the bill because it favors grains over other crops and supports large commercial farms or hobby farmers, who don't need the payments. Even the Iowa Farm Bureau has given up its support for direct payments. Woitaszewski says the amount he receives from the government has dropped dramatically as conditions for farmers have improved. He won't specify how much he gets but says it is roughly enough to cover his property-tax bill. And he says he would consider giving up his payments in return for fewer restrictions on land use. Converting land currently being used to grow grass to corn and other crops is, he says, the only real answer to high food prices.
Some fear that support from Congress could be ending just when the good times for farmers are entering a rough patch. Farming is a capital-intensive business, and most farmers need to borrow to be able to purchase their tractors and other equipment. Many expect that when the economy either improves or gets significantly worse, interest rates will rise. And rising interest rates will make it more expensive for farmers to borrow, which will lower profits. Historically, farm incomes have crashed during times when the overall economy was improving. And some economists, including Yale's Robert Shiller, are saying there is a bubble in farmland. But many agricultural economists believe the rising demand for food in Asia and elsewhere will mean that crop prices will stay high even after the economy improves.
For now, though, years of lackluster economic growth and the so-called rise of the rest are likely to ensure that the good times in the U.S.'s farm regions continue. "For most of these years, we just tried to get by," says Woitaszewski. Now grain bins, which break up the seemingly never ending flatness of central Nebraska, are growing faster than crops. Woitaszewski has his own $350,000 storage project in the works. "These are some of the best economic conditions I have seen in my career," he says. It's a sentiment that's welcome — and rarely heard these days beyond the Midwest's amber waves of grain.
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