I was having lunch with my friend and colleague Andrew Mickey, and our conversation turned to a New York Times article about Wall Street hot shots turning to farming.
Yes, it sounds like a pitch for a remake of the Green Acres TV comedy, but this is a high-stakes twist on a global agri-boom.
The current food crisis sees no letting up, creating opportunities for investors accustomed to commodities such as oil, natural gas and metals. As the Times reported, the largest investment funds have already poured hundreds of billions of dollars into wheat, corn and soybeans.
The stampede into agriculture is driven by a hungry planet and the surge in biofuels. The Times piece cited the BlackRock fund group as planning to invest hundreds of millions of dollars in agriculture, chiefly farmland, in a far-reaching plan that stretches from sub-Saharan Africa to Brazil to the English countryside.
Whether or not this is good for farming is still up in the air. But Mickey and I agreed that anyone who relies on Big Media for their investment research is shortchanging themselves. Because the Times story omitted one of the richest swathes of farmland in the world being bought up by a syndicate of Russian investors.
It's one of those rare plays that you could only discover by actually visiting the place -- a belief underlying the success of other emerging-market success stories such as Jim Rogers and Mark Mobius.
As we dug into lunch, Mickey told me about a trip he took to Russia recently where he got to rub shoulders with some of the countries newest billionaires. In Moscow, he was invited to meet one contact at a private club where a VIP table cost an astounding $20,000 for the night. I know, it sounds incredible, but that's how much money these guys have made in the commodities boom.
And it was at this club where Mickey got his tip on an agricultural phenomenon that you'll probably never read about in the mainstream media. It goes by the name of Black Earth. Mickey had already recommended a stock to his readers, but he swore me to secrecy.
However, he agreed to let me discuss some our lunch conversation about this Black Earth play.
He described this region in Russia as the world's most fertile farmland. As it turned out, Mickey's contact (who he called Vladimir) had just returned from southern Russia -- home of Black Earth.
During World War II, Nazi transport trains headed into southern Russia to drop off supplies to the front lines. Before they returned to Germany, the trains would load up with the soil from the region and transport it back. That's how fertile this soil is.
From a technical perspective, the soil is more specifically know as chernozem. It is black in color and is also found in the wheat and agricultural belts of Canada. Chernozem produces very high crop yields.
It's such great soil because it contains high levels of phosphorous and ammonia. Essentially, this land does not need to be fertilized.
Black Earth is the only solution to one of the greatest problems the world is about to face: declining food production. The lack of food supply has already sent prices soaring around the world. But here's the problem: There's no more farmland. Or so most of the world thinks...
An acre of farmland is changing hands for between $5,000 and $15,000 in places like Argentina and Iowa. But the company Mickey recommended is acquiring some of this Black Earth farmland for pennies on the dollar. The average cost per acre is about $500. That works out to a discount of between 90% and 97%.
It's one of those under-the-radar companies that Mickey finds at all hours of the day. In fact, this one just started trading in North America, giving investors lots of upside potential.
So far, Mickey's company has secured a long-term lease on an more 60,000 acres of this farmland. The company also purchased its first grain elevator and more barns, trucks, tractors and everything else that makes a farm productive. It also has excellent access to railroads.
All that activity has played a major role in allowing this company to ramp up its revenues from a paltry $501,000 to more than $21 million in 2007. In Mickey's own words, he expects the stock to go "parabolic."
If I told you the name of this stock, Mickey would strangle me. I guess I can't blame him. His subscribers of BreakAway Investor wouldn't appreciate me blabbing. So if you're interesting in find out more about this Black Earth opportunity, you'll have to go the BreakAway Investor web site.
--Irwin Greenstein
