Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security under a plan being considered by Beijing.

A proposal drafted by the Ministry of Agriculture would make supporting offshore land acquisition by domestic agricultural companies a central government policy. Beijing already has similar policies to boost offshore investment by state-owned banks, manufacturers and oil companies, but offshore agricultural investment has so far been limited to a few small projects.

I have been watching this trend also.  Some of the Middle Eastern countries with boat loads of US dollars are doing the same thing (buying ag land in South America and Africa) via their Sovereign Wealth Funds. Here are a few general thoughts with very few specifics:

-As China moves from producing all of its own food to a huge importer of food, upward pressure will be applied to food commodity prices. Although there is no indication that the Sovereign Wealth funds are purchasing US ag land, I would think their actions will help support food commodities and thus US ag land prices.

-If this is a major move by the SWF, buying land in South America could  be profitable.  But you had better know what you are doing or invest through an investment company.  The ones I looked at a few years ago were designed to ensure the general managers made money, not the investors. There are lots of political risks in buying South American farm land directly.

-Also buying ag land in the US could also be profitable since ag commodities are traded globally.  You can hire Farm Managers to operate the farm in the US, but most take a healthy cut (7% or so) of the gross but others do operate on a percentage of the profit.  Hard to (impossible??)  have positive cash flow paying 7% of the gross especially if you borrow the money to purchase the land.  If you are serious about investing in US ag land, look in Storm Lake, Iowa for a farm manager and find one that takes a percent of the profit not gross.  This is their main business to work with/manage farm land for out side investors. 

Owning and operating farms in the US is traditionally a tough low margin business.  Owning good farm land in the US mid west has been a good long term investment for the majority of years.  Farm land did crash twenty five years ago or so.  Many farmers and investors went bust.  So it can happen.

The other thing to consider is that farm land has had major moves in prices over the last few years (can you say bubble anyone) with good land in Iowa going up about 20% last year.  Ag is hot right now and generally it is not a good time to jump on board an investment when that investment is on the front page of the financial papers, much better to invest when the stories are small and on page seven. But with China and the Middle Eastern countries controlling boat loads (as in trillions) of US dollars and with their diets changing to more meat, maybe this time it is different. 

 Here's wishing you good investing.