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Forget Gold, Farmland Is Today's Hottest Investor Safe Haven

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With the European Union heading into a tailspin as its member countries inch closer to default one by one and with the US federal deficit continuing to grow, it's safe to say that government bonds are no longer the safe havens that they once were. What do investors turn to then? Precious metals like gold, of course.

But I'm always reminded of what my college economics professor told me: At the end of the day, whether it's dollars or gold, you value it because it can be exchanged for a sandwich. If you're starving, the cure for your pangs is a sandwich, not a bar of gold. So, in a stumbling global economy like ours, the hottest place to park your money might be farmland.

In America, investors in farmland have enjoyed annual returns of close to 11% in the past 20 years. Through June this year, farmland values are up 20%, a rate that surpasses that of gold or stocks, as Time reported this summer.

"I have frequently told people that one of the best investments in the world will be farmland," said legendary investor Jim Rogers of Rogers Holdings in a Bloomberg report. "You've got to buy in a place where it rains, and you have to have a farmer who knows what he's doing. If you can do that, you will make a double whammy because the crops are becoming more valuable."

And as BRIC countries China and India grow their middle classes, the global demand for food will undoubtedly rise and spur the need to increase farm output and prices, since the richer you are, the more likely you are to eat energy-intensive meat..

But what happens when richer investors from the developed world start buying up farmland from the developing world? It might seem like a good idea at first -- poor countries, with limited cash and technology, have a hard time maximizing their agricultural potential. But what's happened in this globalized property market, as a Worldcrunch article points out, is that as well-heeled international investors like foreign governments buy up more and more of farmland, they threaten small-scale local farming:

At first, such a demand for land was well received by countries that can't afford to fully develop their agricultural sector. But problems have quickly surfaced: the financial discrepancies between opulent investors and humble states; the fate of local populations, who often live on the land without any property title; and the question of how the benefits should be divided among investors, host states and local communities.

Indeed, if locals are priced out of food that they've grown themselves because of speculation and a rise in global demand, we could soon be seeing a return of the food riots we witnessed in 2008 in countries like Bangladesh and Mozambique.

Don't feel bad for investing in farmland, though. If you buy it in America, you could stimulate the economy, create jobs in states like Nebraska and Iowa, and given the weak US dollar, even help with America's trade imbalance. And as for the global farmland situation, maybe we should hope China and India go vegetarian from here on out.
POSITION:  No positions in stocks mentioned.