Profit From the Heartland's Newest Cash Crop

by Anthony Summers, Senior Research Analyst, The Oxford Club

wind farms midwestern agriculture

Farmers in America’s heartland have been hurt by the recent slump in agriculture commodities. Corn, wheat and soybean prices have plummeted since 2013.

You can see this downtrend in the chart above. The blue line, which measures total returns of the S&P GSCI Agriculture Index (SPGSAGTR) has dropped by 30% over the last three years.

So low-income farmers have had to find new ways to make ends meet. And many have cashed in on the green-energy boom.

Wind energy is the fastest-growing source of electric power in the U.S. And this trend, combined with falling crop prices, has created a new kind of Midwestern farmer.

“Wind farmers” are profiting from rising wind power demand by leasing their lands to utilities. And more than $128 billion has poured into new wind projects over the last decade.

The green line in the chart above shows the total return for the First Trust ISE Global Wind Energy Index ETF (NYSE: FAN). It’s a measure of the global wind energy market. As you can see, it’s risen by 22% over the same three-year period.

Breezy Profits

Green energy initiatives and financial incentive programs are drawing Midwestern farmers away from traditional agricultural crops and into wind energy projects by the droves.

This trend is concentrated in the Midwest because wind turbines require large swaths of land. And farmers are readily allowing energy utilities to install turbines on their farms because the turbines provide a steady source of passive income and give the farmers a hefty bump in their property values.

Wind farmers also benefit from cost-cutting renewable energy tax credits, which were recently extended by Congress.

One tax break offers a 30% credit on the value of wind energy projects. Another break provides a $0.023 credit for every kilowatt-hour of wind-produced electricity.

These credits spell major tax savings for wind energy producers and help incentivize project development by large utility companies.

Wisconsin-based Alliant Energy Corp. (NYSE: LNT) is a great example. The company is investing $1 billion to expand its wind farm in Iowa. That single farm will produce enough electricity to power 215,000 homes.

Alliant Energy is an attractive choice for income investors as well. It’s up 22.5% year to date and offers a 3.15% dividend yield.

MidAmerican Energy Company, a utility owned by Berkshire Hathaway Energy - which is a subsidiary of Berkshire Hathaway (NYSE: BRK) - is Iowa’s largest energy provider. And it’s profiting from the wind energy boom, too. It’s currently negotiating plans to install an additional $3.6 billion worth of wind turbines by the end of 2019.

But farmers and utility companies aren’t the only ones who can ride the wind energy wave. Regular investors can, too.

Few folks realize that General Electric (NYSE: GE) is one of the largest wind turbine manufacturers in the world. It currently has more than 30,000 wind turbines across the globe.

The stock is down slightly this year, but with a 3.17% yield at current market price, you can still get paid to hold this blue chip.

Or, if you prefer REITs, Hannon Armstrong Sustainable Infrastructure Capital Inc. (NYSE: HASI) is a solid choice to consider. The stock is up 30% over the past year.

Hannon provides capital financing to developers of renewable energy infrastructure, and it currently offers a 5.4% yield.

In the world of energy, oil and natural gas aren’t going anywhere anytime soon. But when it comes to long-term profit potential, renewable energy is where the real opportunity lies.

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