Land Appreciation and Cash Flow
When investing in agriculture, there is solid potential for healthy returns from various sources. Increases in the price of farmland have been steady over recent years. Europe has seen prices double, triple, and even quadruple per acre of farmland since 2004. Productive agricultural land, with water rights and everything else, wherever in the world you look, has, over time, outperformed CPI inflation. Cash flow that stems from leased farmland or from the commodities themselves can also provide a substantial return. Investors can reduce risk by renting land to local farmers who manage the land and make monthly lease payments to owners/investors. Alternatively, cash flow can be augmented by contracting land managers or investing in funds that manage farms
themselves. This latter option increases risk, but the benefit of higher returns in cash flow makes this a lucrative option.
themselves. This latter option increases risk, but the benefit of higher returns in cash flow makes this a lucrative option.
A Haven Against Inflation
It’s no secret that in recent years, lavish lending practices and over leveraging has led the global economy into crisis. Part of the solution to
this crisis has been for governments around the world to increase the supply of money. Additionally, interest rates have been brought near zero. The near future will most likely, hence, bring higher inflation. Farmland pricing has performed extraordinarily well during high inflationary periods. In the 1970s, fruit prices reached astounding levels during high inflation. Considering the fact that food inflation leads overall inflation in many countries reflects the elevated demand for soft commodities. So agricultural investment not only offers protection from inflation, but also even pays you for it.
this crisis has been for governments around the world to increase the supply of money. Additionally, interest rates have been brought near zero. The near future will most likely, hence, bring higher inflation. Farmland pricing has performed extraordinarily well during high inflationary periods. In the 1970s, fruit prices reached astounding levels during high inflation. Considering the fact that food inflation leads overall inflation in many countries reflects the elevated demand for soft commodities. So agricultural investment not only offers protection from inflation, but also even pays you for it.
Diversification
Agricultural land also affords investors the chance to diversify away from stocks and bonds, as farmland is not highly correlated with these more volatile asset classes. This provides portfolio stability during volatile markets while enhancing a portfolio’s risk adjusted return.
