Dangers In Land Speculation

So far we have considered only broadly the beneficial effects of speculation. For guidance to the individual who may regard with favor the speculative opportunities in the purchase of land, the proposition must be considered from a different and more specific viewpoint. Unless one is thoroughly familiar with the science of farming, he is apt to blunder seriously in making an investment in farm land, for not all land is what it is represented to be. Associated with every land boom is the violent tendency to rush values upward, far ahead of the purchasing power, and in consequence there is always the danger of buying at the crest of a speculative wave and finding one's self with property that has to be held for some years before it can be sold at a profit. Meanwhile the investment yields no income such as capital is supposed to produce to be profitably employed. In addition there is a direct loss, for taxes must be paid and improvements made from time to time, all of which call for the outlay of more capital. It may even happen that the land will never again bring the price it cost. There are many localities where this has been the general experience.

With a person who buys farm land for the purpose of cultivating it, there is not this danger. He can make his property produce an income while he is holding it to resell at a profit. In buying land, whether for investment or speculation, it is always the safer course, where it is at all possible, first to visit the land and make a thorough investigation, not only with regard to its own fertility, but to obtain an idea of the value of neighboring farm lands. Where this is done, the danger of buying at inflated values is very much lessened. If a personal inspection is not possible, the next best step is to depend upon the judgment of some one familiar with farming. But the very best thing for a person who is himself incapable of cultivating a farm, is to forego such speculative opportunities, for the risk is always greatest where one has the least knowledge about the character of the enterprise in which he speculates.

Large-Scale Farming

It is impossible to elaborate in detail on the different phases of speculation in land within the restricted space which I am allowed. I can only discuss it in the broadest light and attempt to lay down such general rules for guidance as are the most important, but I could not complete this section without touching upon the many schemes launched from time to time to interest capital in co-operative farming.

So far as I can determine, only a few such plans have proved profitable to those who have placed their money in them. There have been plantation schemes innumerable, launched in the last few years, a great many in Mexico, some in other tropical countries. These plans appear feasible enough. The idea is to cultivate one big plantation and divide the proceeds from each harvest among the many different owners who are the certificate holders. The main trouble with most of these enterprises is that they begin with an excessive capitalization, representing more than the land can possibly be worth even many years hence. Where this is not the mistake, the chief trouble lies in inexperience in handling a plantation. Overseers are employed who know little about the climatic conditions and about raising the crops indigenous to a tropical country. One might as well transplant a native of Mexico or Yucatan to an Illinois farm and expect from him the same degree of efficiency as from a farmer accustomed to the soil and methods of cultivation. Rubber plantations, for example, are plentiful, but financially they have rarely proved successful. All phases of farming seem to have defied so far all efforts to reduce them to a co-operative basis. It still remains an individual art.

Of late there has appeared a tendency to concentrate the ownership of large agricultural properties in this country into stock companies. In the Northwest there have sprung up orchard schemes in which private investors are solicited to take "units," each unit representing the ownership of either one or a given number of acres, and the proceeds from the fruits raised on the property are apportioned among the unit holders. This idea is a new one. It is yet too early to judge whether the plan can be made a permanent success, financially. So far it has been experimental. The idea, however, is being applied to other products of the soil, to oranges, to bananas, and even to nuts in the South. I have even become aware recently of an ambitious plan to operate a large wheat farm in Canada on the same lines. But I still hold that the most profitable farming is that in which the owner of the land directly superintends the cultivation instead of delegating it to strangers, who cannot be expected to have the same interest in its success as the real owners.