ORLANDO (ResourceInvestor.com) -- The long-term trend of resource depletion - manifested today in the "peak oil" phenomenon - poses a severe challenge to an investor. Where do you find lasting value in a scenario where rising energy costs impact every industry and business, inflate all currencies, and make location value unpredictable as transport patterns reorganize?
My personal answer has been to invest in renewable resources. Renewables will continue to produce value regardless of fossil fuel prices or disruptions in the financial economy. In a crowded and growing world, demand for that value - food, feed, textiles and lumber- will also continue.
In concrete terms, this strategy means investing in land used for row crops, pasture, orchards or forestry. Unfortunately, there are no publicly traded funds, at least in North America, that invest in such real estate. You will search in vain through the many "natural resources" funds to find one investing in resources that aren't mined or pumped.
There is at least one institutional fund, Hancock Agricultural Group, which invests in cropland, groves and tree farms. For qualified Canadian investors, the Agricultural Development Corporation (ADC) offers limited partnerships in Saskatchewan farmland. But for most of us, investing in renewables means a major real estate purchase, with the attendant expense and risk.
My wife and I bought cropland in Iowa in 1995; last year we added another parcel. Over the years, we've seen net income around 5%, while the market value of the land has more than doubled. Hancock reports similar returns on cropland, while ADC shows a higher rate of income.
The one big risk on the horizon is climate change. As global warming proceeds, the U.S. corn belt and other mid-latitude agricultural regions are likely to get hotter and dryer. In contrast, some climate models and scenarios show growing conditions in Canada and northern Europe actually improving.
Even if a real estate purchase is out of the question, I suggest keeping the renewables sector in mind for the future; there may be better opportunities. For farm families, here's another reason to hang on to the land.
