The "dot.corn" bubble may be about to burst as farm land prices spike and agriculture stocks rise even faster than Internet shares did in the late 1990s, Citigroup chief equity strategist Tobias Levkovich said Wednesday.

"Excess excitement in the farming sector seems reminiscent of days past," Levkovich wrote in a note. "The refrain of 'everyone has to eat,' while catchy, can also lead to sentiment-based investing and not more rational fact-driven constructs."

Investors are obsessed with the idea of three billion new consumers in emerging markets such as India and China filling their bellies with protein as their incomes rise to new highs, he said. This means demand for more livestock, more grain-based feed, more equipment, more seed and more fertilizers.

The perception of never-ending demand and ever-dwindling supplies has driven up shares of companies such as Potash Corp. (up about 1,000 per cent in five years), Monsanto Co. (852 percent) and Agrium Inc. (221 percent) in the last five years.

"Throw in a federally mandated ethanol boom, and the investment thesis receives even more traction," he said. "Yet, we have a tendency to be cautious of exciting stories that are broad-based with many people jumping on the bandwagon-deep scrutiny is often missed because the theme is so compelling and thereby 'must' be rational."

In the last five years, agricultural stocks have put in a stronger performance than Internet stocks did during their late 1990s heyday, he said. The so-called dot.corn boom should "give overly enthusiastic investors pause," even if the agriculture companies are trading at price-earnings ratios lower than the Internet companies did at their peak.

"Low P/Es should not provide any valuation comfort since that often reflects the market's ability to sniff out the likelihood of peak earnings," he said. "Hence, we remain skeptical about the agricultural theme and the various investment beneficiaries including seed company, farm machinery producer and fertilizer equities.

Levkovich's main concern is the rapidly increasing cost of farm land. The recent spike in value-from $1,400 an acre in 2004 to upwards of $4,500 in 2008-along with a surge in revenue hint at a bubble, he said. It will burst when higher-than-average yields drive down crop prices, leaving farmers will less money to invest. This, in turn, will decrease demand for products from companies such as Potash and Agrium.

"Since farmer wealth is heavily influenced by real estate values, such spikes should be looked on with concern," Levkovich said. "Keep in mind that household net equity in real estate as a per cent of household net worth is far lower than it is for farmers. Yet everyone seems worried about weaker home prices for consumers and do not seem bothered at all by a plausible pullback in farm land values, given the recent pattern."

The bubble scenario isn't new. Sue Martin of Iowa's Ag & Investment Services started her career in 1973 when high crop prices pushed the cost of machinery, land and fertilizer higher for U.S. farmers. As inventory increased, crop prices fell. Commodities, however, remained high and drove many farmers out of business.

"Farmers became extremely squeezed," she said. "I think you're about to see another contraction, and that affects the whole chain. Farmers and investors have made very good money in the last five years, but the price of everything else has also increased. It leaves them very vulnerable."

There's one noticeable difference in the farming story in 2008 against 1973-biofuels add another customer to bid up the price of corn and oil seeds. Some analysts suggest ignoring the ethanol boom, coupled with population growth, is missing the story.

"A lot of folks have been wanting to call this a bubble and you are always going to have people who want to be the first to say they saw it coming," said Karol Aure-Flynn, an executive director at Rabobank Group. "But demand for crops has kept up even as commodity prices have increased. World demand is such that commodity prices are just unlikely to return to previous levels."

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