By Lee Sherman
There are approximately 911 million acres of farmland in America, according to the US Department of Agriculture (USDA). And crops aren’t the only thing that’s growing. USDA’s annual June Area Survey indicates that farmland values began rising in 1988 and, except for single-year declines in 2009 and 2016, have continued rising. The picture changes a bit when you adjust historical data for inflation, indicating that farmland values didn’t begin to rise until 1993, and between 2016-2020 were 1.3 percent below their 2016 level on average. But most advisors agree that farmland remains a good investment.
Most farmland is in the hands of existing and retired farmers and ranchers but it’s still possible for non-farmers that are accredited investors (ie: those with a high net worth of more than $1 million excluding the equity in their primary residence or high income of $200,000 in each of the last two years, or $300,000 if married) to get in on the action. As with so many asset classes, the internet has made investing in farmland easy for high net worth individuals.
Farmland is available for accredited investors through a number of emerging crowdfunding platforms including AcreTrader, FarmFundr, FarmTogether, Farmland LP, Harvest Returns, and Steward. Since farmland is a specialized asset class, it’s good to get some help from the advisors that understand it the best. Overall, we are seeing a democratization of an asset class that was once dominated by large financial institutions and has only recently become available to passive financial investors.
These platforms can fill in the gaps for local farms that struggle to access the capital they need to grow, while passive investors interested in sustainability will find that investing in agriculture is a good way to help maintain an agricultural ecosystem that is so vital to our everyday lives. Investing in income-producing farm, timber, or ranch land can provide tangible yields derived from naturally produced products. And the really good news is that these types of investments have beaten the returns from other asset classes with little to no correlation to the overall stock market and are a good investment in times of market uncertainty. While investing in farmland lacks the sex appeal of high flying high tech stocks, it may be a better bet over the long term compared with stocks, bonds and real estate investment trusts (REITS). Believe it or not, investing in agriculture is a better hedge against inflation than gold.
As we’ve seen farmland investing can be an effective long-term investment strategy that complements an investment in traditional real-estate. Compared to REITs, farmland improves both the average annual return and the risk-adjusted return of a portfolio.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.