Farmland as an investment is something that most people don’t think of, let alone consider as an inflation-proof investment. For most, outside of the rural communities where farming is a way of life, the idea of a farm doesn’t go further than tractors and cattle. But as we teeter on the precipice of impending inflation in the aftermath of trillion-dollar spending bills and bulky stimulus packages trying to ease the impact of the coronavirus pandemic, it’s time to consider new options.
Over the last 50 years, American farmland has steadily increased in value. In fact, every year since 1991, farmland has produced a positive return. But the real reason that farmland is an inflation-proof investment is that its performance doesn’t seem to have any correlation to the performance of other markets. Here’s why.
Wide Variety of Supporting Industries
The agriculture industry has a wider reach than you might think. In order to operate a successful farm, we need seeds and heavy machinery for working the fields. We need irrigation and a variety of manufacturing facilities to support the processing of corn, soybeans, and other crops. Agriculture has a positive impact on our foreign trade.
Ease of Creating Passive Income Streams
Farmland is unique compared to other property investments. There is no turnover or vacancies to contend with, and the property owner isn’t responsible for any of the operations that occur on the farm. A farmer cash rents the property in exchange for farming it.
The appreciating value of farmland creates a secondary income stream that pays out when the property is sold. As the American agriculture market remains strong and commodities like corn and soybeans continue to sell for high market prices, the value of farmland is only slated to continue to increase in value.
Low Maintenance and Low Debt
Unlike buildings, farmland does not require maintenance. It doesn’t wear out, and it cannot be vandalized or burned down. This makes it the ultimate passive investment. All you have to do is collect the rent checks while someone else takes on the hassle of working the land. Even property taxes are generally lower on farmland due to agricultural exemptions.
Portfolio Distribution for Future Planning
Future-focused asset allocation puts the emphasis on planning for the future, which is tricky because nobody has a crystal ball. As an investor, you have to balance your personal financial goals with high-value, highly stable investments. Gold has always been the quintessential stable investment. But we would argue that farmland is far more stable than the precious metal markets.
High-Demand Products Offer Stability
As the world continues to face a global supply and demand imbalance where food supply is concerned, farmland continues to grow in value. The global population continues to rise, which will only drive up the demand for agriculture to keep up with food production. In addition to the growing demand for food worldwide, there is a move towards eating healthier. The farm-to-table movement is shining a spotlight on the agriculture industry, which will only increase the demand for farming. And very possibly, create a secondary market of high-value farmland ideally suited for organic farming markets.
Land Income sources the best quality of US farmland for our portfolio. It is our goal to make farmland investments accessible, and by doing so, we have helped hundreds of investors put millions in their pockets. Learn more today.
Why Farmland is a Good Investment in Any Market
A good investment is essentially defined as anything that has a high yield and low volatility. Agriculture meets both of these things in a hands-off, low cost, and low maintenance way. Now is the best time to invest in farmland because there is a finite amount of farmland, and as investors begin to see the hidden value in agriculture, the opportunities to invest will be more difficult and more costly to come by.
Farmland covers a broad definition that can be categorized as either livestock farming and crop farming. While both are valuable investments, the risk is likely lower in crop farming because there are no variables in the cost of feed or potential illness that can wreak havoc on an investment. Crops are not completely resistant to low-yield conditions like drought or pests. But the field of crop science has done wonders in engineering hardier, more resistant crops.
If you go the crop route, let’s look at the difference between row crops and permanent crops. Corn, soybeans, and wheat are the most common row crops. These are planted each spring and harvested each fall. A particularly wet spring can keep farmers out of the fields, shortening the growing season. Similarly, prolonged drought in the later summer can hurt the growth and yield of these crops. Yet, despite these risks, they continue to stay strong.
Permanent crops like citrus, apples, nuts, and olives do not have to be replanted year after year. But they are still prone to weather conditions or diseases that inhibit growth and reduce yields. There is no foolproof agriculture investment, but side-by-side with traditional real estate, it tends to be a great passive income opportunity for investors.
The Takeaway on Farmland Investments
All things considered, farmland is a terrific, future-minded investment. WIth positive returns every single year since 1991, it’s hard to deny the stability in agriculture. Like gold, the agriculture market seems to be entirely independent of other economic markets. That means that values can bottom out in other investments with little or no impact on agriculture investments. Plus, the amount of farmland is finite, but its usefulness is not. The demand will continue to grow into the future, strengthening its stability as an investment. Now is the right time to get your piece of the pie and invest in farmland.
Land Income is your trusted partner for sourcing and investing in valuable American farmland. We make institutional farmland investments accessible to all investors. Contact us today to learn more.