I had an old friend try to convince me to buy in on an investment in a $12 million mansion in the Outer Banks: "You know, they ain't making anymore of this beachfront property." I told him Mother Nature is regularly resettling the beaches with tough storms adding and removing 100's of meters of coastline on a regular basis. That's no investment, that's a hobby for rich people.  I told him for that money he could by a few thousand acres of good Iowa farmland,  they certainly aren't making any more of that either, and when push comes to shove I still eat but I haven't made my annual journey to the Outer Banks since this recession started. Or for $12 million you can buy a few hundred thousand acres in a place like Kazakhstan where I just traveled a couple weeks looking for a good farm to buy.  The land is not as good as that lush Iowa dirt, and you may only net $10 an acre instead of the net a dozen times or more than that in Iowa. 

On the other hand,  that Iowa productivity bounces up against the law of diminishing returns, it will take a lot longer to up the yields on Iowa acreage whereas,  tripling the yields on unprofessionally or unscientifically farmed Kazakh steppe can be done by just picking the low hanging fruit, so to speak, and pardon the pun.  Isn't that what investment is all about, profit per unit divided by investment per unit times utilization. Moreover, in the last decade, farmland no longer produces solely food energy.  The landscape of agriculture has changed forever only recently as farmland is now an industrial commodity capable of producing energy in the form of ethanol and biodiesel, a new flexibility and opportunity for diversification and profit.  A farmer may now convert his corn into fuel for his tractor, or into tasty cornbread, but no matter how hard he tries, a wildcatter can't make oil into a sandwich.

Being the 9th largest country in the world with a population of just 15 million, Kazakhstan ranks consistently number 2 in arable land per capita, and much of that land is not even cultivated in these tough economic times, and what is under plow is cultivated primitively.  (Australia, the Saudi Arabia of farm land bank significantly leads the pack-I hate leaving those obvious next questions unanswered).  Kazakhstan's next door neighbor China has 20 individual cities with more people than the whole of Kazakhstan, but 1/20th the arable land per capita.  Sure China has that unparalleled secular growth story, but it's fiercely competitive unprofitable growth.  And sure China has those enormous currency reserves,  but on a per capita basis not as much as cash as Kazakhstan,  nor as much oil, gold, zinc, copper, uranium, gas, nickel, titanium, niobium… ;no need to list the whole of Mendleev's table, but it all applies.  And farmland. Not bad for such a huge country nobody ever heard of, and most can scarcely find it on a map but while the hot money chases deals in China I keep wandering the endless steppe just a bit further west.

Anatoly Veltman adds:

I had the distinct honor of participating in the Kazakhstan Economic Forum just ended at the Harvard Club of New York. I was extremely impressed by the government officials and roster of entrepreneurs in working sessions, as well as networking. Nick Pribus was one I distinctly remembered, and we continued brainstorming over lunch — as our initial introduction during a Carnegie Hall intermission the night before was neither the time nor the place (Kazakh concert, by the way, was truly divine). Nick's decade of experience in the region makes him a leader in the field, at least among the Americans in the space. I hope he finds time for more Russian tutoring, and I hope his quest to raise $300 million of seed capital (pun intended) finds the resource. The natural stats are very compelling, and I really see in the Kazakh steppe a future picture of Omaha steaks!


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