Perry Vieth baled hay on a neighbour's farm in Wisconsin for two summers during high school in 1972 and 1973.
The gruelling labour left him in no doubt about getting a degree so he'd never again have to work so hard for a pay cheque. Thirty-eight years later, and after a career as a securities lawyer and fixed-income trader, Vieth is back on the farm.
Except, he now owns it. As co-founder of Ceres Partners, an Indiana-based investment firm, Vieth oversees 61 farms valued at US$63.3 million ($76 million) in Illinois, Indiana, Michigan and Tennessee. He's so enthusiastic about the investments that he quit a job in 2008 overseeing US$7 billion in fixed-income assets to focus full time on farming.
"When I told people I was leaving to start an investment fund in farmland, they said, 'You're doing what?"' says Vieth. "It will always be difficult for Wall Street firms to understand. It's not like buying stocks on a computer."
It's much better: returns from farmland have trounced those of shares. Ceres Partners produced an average annual gain of 16.4 per cent after fees from January 2008, just after the firm started, through to June of this year, Vieth says.
The bulk of the returns are in rent payments from tenant farmers who grow and sell the crops, and from rising land values. Over the same period, the Standard & Poor's GSCI Agriculture Index of eight raw materials gained 5.3 per cent annually and the S&P500 share index dropped almost 1 per cent.
Investors are pouring into farmland in the US and parts of Europe, Latin America and Africa as global food prices soar. A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 per cent of South American farmland venture Adecoagro, which says it has more than 270,000ha of farmland.
Investment companies Ospraie Management and Passport Capital are among those betting on farming, as is Harvard University's endowment fund. TIAA-CREF, the US$466 billion financial services giant, has US$2 billion invested in around 240,000ha of farmland in Australia, Brazil and North America and wants to double the size of its investment.
"I have frequently told people that one of the best investments in the world will be farmland," says Jim Rogers, 68, chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1996.
"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."
The growth in demand for food, spurred by the rising middle classes in China, India and other emerging markets, shows no signs of abating. Food prices in June, as measured by a United Nations index of 55 food commodities, were just slightly below their peak in February.
So many investors have rushed to capitalise on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20 per cent in the first quarter compared with a year earlier.
"Yes, farmland will be a bubble again; all agricultural products will be in a bubble again," says Rogers, who is an investor in Agrifirma Brazil, a South American farmland owner.
Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers filed for bankruptcy in September of that year and the S&P500 share index plunged 43 per cent in the next six months.
He purchased 3240ha in Uruguay, three smaller plots in southern Illinois and a 32ha New Zealand kiwifruit and avocado orchard.
"We really thought all the investment banks would go under," says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. "Everyone said, 'Buy gold.' But at the end of the day, you can't eat it. If everything else goes and I just have these farms, it makes me moderately wealthy."
The hedge fund Diggle co-founded, Artradis Fund Management in Singapore, suffered about US$700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management.
Diggle plans to incorporate his five farms into an investment management group run by Vulpes.
From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he's witnessed aspiring locals eating their way up the food chain.
"You can see what a more prosperous China will consume," says Diggle, 47. "It means more dairy, more meat - not just pork and chicken."
In farmland, investors find respite from the cyclical price swings of the commodities market. Since 1970 there have been at least four price jumps of at least 100 per cent that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of a hectare of farmland tracked by the US Department of Agriculture has been on a mostly steady climb from US$1813 in 1980 to US$5781 this year.
"Farmland is the lowest-risk part of the value chain, but it's also a key part of production," says Jose Minaya, TIAA-CREF's head of natural resources and infrastructure investments.
In Britain, where farm prices are also rising, one money manager traded his career at BlackRock for one in farming. Graham Birch left in 2009 as the London-based head of the natural resources team at BlackRock, the world's biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.
Birch, who says farming has suffered from a lack of investment and management talent, has spent US$1 million on improvements. He now captures all of the effluent from his 600-cow herd, stores it in a 4-million-litre steel tank and uses it as fertiliser for his crops.
"At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do," Birch says.
At Ceres Partners, head office is in an old farmhouse that sits in the middle of cropland.
Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P500 options. After a series of stints running an arbitrage team for Fuji Securities and other firms, he was hired as chief investment officer of fixed income at investment manager PanAgora in 1999.By 2006, Vieth's concerns about the economy were mounting: inflation was at a low, and the dollar had peaked as US debt and deficits soared.
So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts US crop exports.
Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres' liaison person with tenant farmers.
As the dollar fell 24 per cent against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends.
So in late 2007 he founded Ceres, just as tightening credit markets began to push the global economy into a recession.
He named the firm Ceres both for the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago. "I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify," Vieth says. By May this year he had collected 6970ha, mostly in the Midwest.
When Vieth wants land, he goes shopping, as he does with Zick and Blum in southern Michigan. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.
The trio drive by a 140ha farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter. "Those trees will shade the corn and stunt growth," he says. Blum doesn't like the many rocks scattered on the unplanted dirt. Zick is sceptical that the bank will get its asking price of US$17,200 a hectare in a foreclosure sale.
The investors next visit a farmer they hired, Ed Kerlikowske jnr, who grows watermelon, peas and corn on their 316ha spread near Berrien Springs, Michigan. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that they would otherwise have to spend on land. "To really grow the business in today's economy, you need partners," says Kerlikowske as he passes around slices of fresh watermelon.
The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp, which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
Charles McNairy, whose family has been involved in agriculture since 1871, says neophyte investors who lack a deep understanding of farming are making bad deals.
In 2009 McNairy started US Farming Realty Trust, a fund based in North Carolina, that had raised US$261 million as of late May to buy farms, according to a Securities and Exchange Commission filing.
McNairy says funds such as Ceres have been overpaying for land, based on the return from crops.
"Ceres shouldn't be buying in the Midwest," says McNairy, who declined to disclose the states he invests in. "It's crazy to be buying up there."
Vieth disagrees, saying Ceres' returns prove that his strategy is working. "I certainly don't want to start slinging mud, but I don't know what the heck he's talking about."
Vieth's farm funds are facing head winds in coming months and years: a likely rise in interest rates will push up his acquisition costs and the value of the dollar, which in turn might hurt commodity exports. While the former trader keeps a close eye on the dollar, he says farming will continue to thrive.
Investors seem to agree. At a dining-room table in the farmhouse in Granger, Vieth sits down at his computer one evening and totals the day's haul: another US$900,000 from investors looking for comfort - and profits - in one of the oldest and most essential industries on the planet.