Farmland has been a great investment during the past 20 years, especially in the U.S., where annual returns of approximately 12 percent have been the norm. With tax breaks and government farm programs, farmland investment has outperformed most major asset classes.
As noted, this has been a long-term situation with low volatility; therefore, institutional investors have used U.S. farmland as a rock solid place to invest money for the long term.
The rest of the world has its own peculiarities related to farmland investment, but, in general, farmland has not been a bad place for investment. The amount of money needed for investment and the diversification of those investments means farmland isn’t like putting all your eggs in one basket such as multibillion-dollar deals of skyscrapers or pipelines.
The one thing that has been true and holds true today, especially as the outlook for making a return on investment is a little cloudier with a lot of farming outputs earning less income, farmland investment is not a buy it and flip it for a big return.
All of this and much more about both U.S. and international institutional investment is in a recent article published by The Economist. The article—“Barbarians at the farm gate”—is available by clicking this link.