Good Times on Iowa Farms Make Economy Less of Caucus Concern

December 29, 2011, 4:58 AM EST By Alan Bjerga

(For more on the 2012 election, see ELECT.)

Dec. 28 (Bloomberg) -- It’s hard not to feel the rhythm of a different era when Gordon Wassenaar and Dean Taylor meet for lunch at Goldie’s Ice Cream Shoppe LLC in Prairie City, Iowa, 20 miles east of Des Moines.

A restored 1950 Ford with painted-on flames sits in the parking lot of the diner and ice cream stand, across the street from a co-op grain elevator. In 2009, the Iowa Pork Producers Association gave Goldie’s its annual award for the state’s best breaded pork tenderloin sandwich. And talk among the restaurant’s regulars focuses on a topic that in much of the U.S. sounds like the distant past: prosperity.

“You’ve got people buying new machinery, new pickups and cars,” said Wassenaar, 75, who raises corn and soybeans. “You don’t hear the doom and gloom in the rural areas.”

That separates these Iowans from voters elsewhere, who rate the U.S. economy as a top concern in opinion polls. For rural Iowans, boosting ethanol production and promoting free trade loom as the prime issues, according to farmers, state officials and analysts.

In the state’s Jan. 3 Republican presidential nominating caucuses, such concerns should help former U.S. House Speaker Newt Gingrich, whose consulting firm earned $575,000 between 2009 and this year for advising an ethanol industry lobbying group, and harm Texas Governor Rick Perry, who proposes ending all federal energy subsidies, including those for biofuels.

99 Counties

Rick Santorum may benefit from the time he has spent in rural Iowa; the former U.S. senator from Pennsylvania has made a point of visiting all the state’s 99 counties. Mitt Romney, who today begins a bus tour of Iowa, may be hurt by not having focused on the state until recently; Taylor terms the former Massachusetts governor “a little hard to pin down.”

Representative Ron Paul of Texas also opposes federal aid to the ethanol industry yet enjoys a solid core of support in Iowa based on his calls to significantly shrink the federal government and expand personal liberties. During a Bloomberg News reporter’s five-hour drive along rural roads only two yard signs for a candidate were spotted, both for Paul.

“People may not like some of his positions, but they admire his consistency,” Iowa Governor Terry Branstad, a Republican, said of Paul.

Attacking Obama

The leading Republican candidates have spotlighted the overall U.S. economy as President Barack Obama’s main failing in office, and they generally hammer away at that theme in their Iowa appearances.

Gingrich told a Rotary Club audience in Dubuque, Iowa, yesterday that Obama is an “anti-job creator.” Romney in a speech in Davenport, Iowa, yesterday described a nation beset by economic anxieties and decried what he called “the Great Obama Recession.”

Across the nation, though, farm profits are at a record and agribusinesses are thriving. Shares for Terra Nitrogen, a Deerfield, Illinois-based fertilizer-maker, are up 49 percent this year.

Iowa has seen record incomes as the nation’s top producer of corn, soybeans, pork and ethanol. Its state and municipal bonds had a total return of 11.7 percent through yesterday, trailing only Wyoming, Illinois, California and Montana, according to Barclays Capital. Unemployment is 5.7 percent, compared to 8.6 percent nationwide.

One in six Iowa jobs are tied to agriculture, according to a 2009 study by Iowa State University economist Dan Otto. Minneapolis-based Cargill Inc. in March took over a flagging ethanol plant in Fort Dodge, Iowa. Pioneer Hi-Bred, the seed division for DuPont Co., is headquartered in Johnston, Iowa.

Acreage Prices

Land prices at an average of $5,600 an acre in Iowa are more than triple what they were a decade ago. Pork, crop and ethanol producers are prospering in part because of exports. U.S. shipments of pig meat were up 22 percent this year through October, while one of every four rows of soybeans is sent straight to China.

Jim Dougherty, who grows corn and soybeans near Lake City, Iowa, about 75 miles northwest of Des Moines, just bought a John Deere combine for the 520-acre family farm, founded in 1909. The combine retails for $165,000. Dougherty bought it in part to keep his taxes down.

“It’s not unusual to see farmers put 50 percent down or write a check to cover the cost,” he said.

Undecided Voters

Dougherty, 74, remains undecided about whom to support, like many Iowans. He and other family members are “still trying to make up our minds,” said his daughter, Darcy Maulsby, 38.

“We don’t look to politicians to have all the answers,” Maulsby said. “We just want the government to get out of the way.”

Polls have also shown that a majority of likely caucus- goers are open to switching from whichever candidate they currently back.

In a time of ample credit and attractive returns on land and crops in Iowa, bankers -- often a source of frustration for farmers -- are seen as partners in prosperity. Taylor, one of the diners at Goldie’s, distinguished between investment bankers and small-town lenders.

The collapse of MF Global Holdings Ltd., the Wall Street firm that former Senator Jon S. Corzine of New Jersey headed, is hurting faith in commodity trading, he said, while confidence in community banks and the farm credit system is strong.

“I won’t do business with a bank whose name you’d recognize,” said Taylor, 64. “If you deal with a bank that’s out of your league, they’ll squash you like a bug and not realize it.”

Protestors

The week before Christmas, a group called Occupy Iowa City disrupted a restaurant meet-and-greet held by Minnesota Representative Michele Bachmann, another Republican presidential candidate. The protestors chanted “Go, just go” at her.

Dave Seil, 47, of Gowrie, Iowa, responded to the demonstration with rolled eyes.

“They just kind of shoot themselves in the foot,” said Seil, who grows corn and soybeans along with raising a herd of about 35 beef cattle.

In 2008, Seil backed former Arkansas Governor Mike Huckabee, the winner of that year’s Republican caucuses. This time, he’ll be out of town and unable to attend.

Turnout Question

Branstad, elected governor in 2010 after previously serving four terms in the office, said prosperity means less urgency for rural voters to participate in the caucuses. Still, he expects a high turnout among farmers.

“They’re not in the fields, so they have the time,” he said. “They’re very concerned about the international marketplace and where candidates stand on renewable fuels. They’re very concerned about interest rates and the debt.”

In a voter report card prepared by the Iowa Corn Growers Association that rated the presidential candidates on their positions on Iowa farm issues, Gingrich received an A grade and Santorum an A-. Romney got a B, Perry a C-, Bachmann a D+ and Paul a D.

Obama received a B.

“Gingrich and Santorum are right up there as people who will work with ethanol,” said Taylor, who grows corn and soybeans. Of Perry, he said, “he’s Texas and oil. He’s the anti-Iowa.”

Taylor said he’s leaning toward supporting Romney, despite some qualms, mainly because he likes his chances of beating Obama.

“He’s made some comments about trade and China that’s made a lot of us Iowans nervous,” Taylor said, referring to Romney’s call to label China a currency manipulator and put new tariffs on its imports. “But he’s the most likely to carry the independents in the election, and we need to win this one.”

--With assistance from William Glasgall in New York, Tim Higgins in Dubuque and Lisa Lerer in Davenport. Editors: Don Frederick, Mark Silva

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

View the original article here

Hedge-Fund Millionaire Diggle Bets on Farms, Life Sciences

December 28, 2011, 6:12 AM EST By Netty Ismail

(Updates with assets under management in ninth paragraph.)

Dec. 28 (Bloomberg) -- Stephen Diggle, who co-founded a hedge fund that made $2.7 billion in 2007 and 2008, plans to open his personal farmland portfolio to investors and start a fund that will trade life-sciences companies.

Diggle will transfer the farm assets from his family office to Singapore-based Vulpes Investment Management, which he set up in April after liquidating his previous firm’s volatility funds. Diggle’s family also holds “significant stakes” in life sciences, including biotechnology companies, which will be moved to a fund he plans to set up next year, the 47-year-old said.

“Everything that we are investing in personally is available to investors,” Diggle said in an interview. “We have got capital committed, we are focused on a number of things where we think there’s a compelling opportunity to make money.”

Diggle is widening his new firm’s investments after starting a volatility fund in May and taking over the Russian Opportunities Fund and Testudo Fund from Artradis Fund Management Pte, which he and co-founder Richard Magides closed in March. Once Singapore’s biggest hedge-fund manager, Artradis’s funds, which sought to profit from price swings, lost $700 million as volatility declined in 2009 and 2010.

“The one thing I didn’t want to do was to spend the rest of my life talking about how great 2008 was,” Diggle said. “You have to move on and find new challenges. That’s what gets you up in the morning.”

Volatility Cost

Vulpes, which focuses on alternative investments, started its long Asian volatility and arbitrage fund, LAVA, on May 1 with $30.5 million, of which $30 million was the founding partners’ money. The fund size has increased to about $50 million after some of Artradis’s former clients returned to invest Diggle. The fund has gained 6 percent since May, he said.

LAVA seeks to produce returns that aren’t correlated with the market by trading instruments that thrive on volatility, such as options, warrants, and convertible bonds. The fund uses strategies such as arbitraging or profiting from disparities in the price of similar securities simultaneously traded on more than one market, and tends to work well when markets go down.

“The cost of being long volatility on a daily basis as a buy and hold strategy is not going to make money in the next few years,” Diggle said. “You have to be more deft in your timing and more selective in what you own.”

Farmland Transfer

Diggle plans to transfer ownership of his farmland into a holding company, in which outside investors can hold shares, he said. Vulpes, which currently manages about $200 million, will own and operate the company. After buying farms in Uruguay and Illinois, as well as a kiwi-and-avocado orchard in New Zealand, he plans to pour money into Africa and eastern Europe as global food prices soar.

The value of farmland in the U.S. has probably gained 20 percent to 30 percent in the last two years, while Diggle’s investments in Uruguay may have risen 50 percent as sheep and cattle prices almost doubled in Latin America this year, he said.

Agriculture would be the “single most interest opportunity over the next 10 to 20 years,” Diggle said.

Vulpes favors investments in metals, energy and food, and “dislikes” government bonds, he said.

“Being long stuff in the ground is going to be a better place to be than holding pieces of paper,” Diggle said.

The firm’s Testudo Fund, which is heavily invested in precious metals and the mining industry, has gained 2.5 percent this year. The Russian Opportunities Fund has declined about 10 percent in the same period.

‘Biggest Risk’

Governments and their policies represent the biggest threat to investors, he said. “The biggest risk will come from governments: government interference in markets, government debt and government manufacturing of paper money to pay off the debt,” he said.

Diggle said he’s focusing on “new exciting commercially viable technology” in the life sciences industry that will find cures for illnesses including cancer and Parkinson’s disease.

“We certainly see a lot of interest by big pharma in small innovative biotechnology,” Diggle said. “If we can find those small new exciting biotechnology companies before big pharma gets to them, there’s a big uptick in terms of valuation if they can prove their work.”

--Editors: Linus Chua, Andreea Papuc

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

View the original article here