Scarcity yields value.  Only about 11% of global land is arable; that is, able to support non-tree crops.  Incredibly, most arable land is used to raise livestock.  High demand and low supply mean your farmland will retain its value and, more likely, increase in value at a rate greater than most other investments.

          As Mark Twain once famously said, “Buy land — they’re not making any more!”  Savvy investors have been following Twain’s advice and snatching-up farmland for decades.  Large university endowments, celebrities, pension funds, specialty investment banking divisions and the 1% have been grabbing farmland knowing full well that, indeed, they aren’t making it anymore.

          Environmental factors are also reducing the amount of land available for farming.  Increasing temperatures, changing rain patterns, and degraded soil quality mean that many areas of the world are no longer able to reliably sustain growing crops.  Climate change, regardless of the cause, is having a negative impact on farming.

          We all wish we had bought Amazon at $18, Bitcoin at $1, or Apple at $22.  Those that did were either visionaries, risk-takers or both.  Buying farmland also offers tremendous opportunity with a much lower risk.  However, buying in at the point of inception rather than purchasing an established farm means you’re first in line to profit from both the sale of your harvest and the appreciation of your land.  To quote Billy Shakespeare, what’s past is prologue, right?

          As educational and work opportunities have increased worldwide, more and more farm families are losing their sons and daughters to jobs in the big city.  Farmlands that have been lovingly cared for by the same family for more than a century but don’t have a succession plan are coming up for sale and just need the right farm management team to take it over.

   So, why do the wealthy put their money into farmland when there are so many other options?   For starters, farmland has historically outperformed the Nasdaq, gold, traditional real estate and the S&P 500. 

          If that didn’t grab your attention, how about the fact that farmland has an overall lower risk than traditional investments or that farmland has steadily increased in value year-over-year? 

          Did you lose money in the 2008 Great Recession?  Did you lose money when the stock market tanked in March of 2020?  Farmland owners didn’t lose any sleep because they knew their investment was secure and continuing to grow in value. 

          In the U.S., farmland values have increased by more than 300% since 2000 according to the National Council of Real Estate Investment Fiduciaries.  Internationally, farmland values are lagging behind America but the same phenomenon is taking hold.  They further noted that agricultural lands in emerging markets are available at a more affordable cost with the potential for higher returns when compared to developed countries.  Land in Asia, Central and South America presents not only an affordable alternative to acreage in America, but labor costs are also substantially lower.

          As Paul Polman, CEO of Unilever, said at the World Economic Forum, “Investing in agriculture brings one of the highest returns you can have.”  The amount of farmland is finite, it generates an historically stable passive income and has performed better than conventional investments for decades.

 If you’ve been to the grocery store produce section lately, you’ve noticed that the price of just about everything has gone up appreciably in the last year or so.  Minor inflation in the range of 2% or so is a natural consequence of an expanding economy, but what we’re seeing now is different… 2021 was over 7% with predictions of 10% or more for 2022.

          Guess what?  If you are growing those limes, oranges, strawberries, mangos, dragon fruit or avocados, you’re cashing in on the increase in prices.  Your investment is making money on inflation.

          Precious metals – gold in particular – are often touted as the answer to inflation.  And it’s true that gold typically goes up in value as inflation soars.  What most people don’t know is that farmland actually outperforms gold.  Not only does the underlying value go up with inflation, but you have returns from the sale of your crops that also go up with inflation.

          The value of farmland has historically been closely connected with inflation.  Farmland has a 70.00% correlation with the Consumer Price Index (CPI) and a 79.84% correlation with the Producer Price Index (PPI).  The simple reason is that as food prices go up, so too does the income from those products and the land also becomes more valuable.

          Those of us old enough to remember the hyperinflation of the late 1970s are especially wary of what is to come.  The increase in the money supply over the last several years combined with supply chain issues and central banks that are late to recognize the current inflationary environment pushes us to take steps to counter these inflationary times by investing in farmland as a hedge.

  According to a Gallup poll, upwards of 55% of Americans own stocks either directly or through mutual funds or exchange-traded funds.  The percentage was over 60% before 2008 but hasn’t fully rebounded since the recession.  Still, that’s over 180 million people in the U.S. that participate in the stock market.  By comparison, less than 0.5% of Americans own farmland; only about 1.5 million.

          You can own assets like gold or cryptos, but their value is determined by the market and the broader worldwide economic fluctuations.  On the other hand, farmland and the crops they produce create inherent value, especially as the amount of farmland diminishes and worldwide populations continue to grow.

          I’ve dipped my toe in the cryptocurrency pond but I’m still not convinced that I won’t lose it all at some point.  What do I own?  I can’t touch or see it.  I don’t even have the assurance that some company produces a service or product that has value.

          The markets can (and are) being manipulated and cryptos are possibly ephemeral, but land is tangible.  You can smell the dirt.  You can grow something in it and not only have the satisfaction that comes from producing food, but you can see and touch what you own. 

“You buy 100 acres of farmland and it will produce for you every year.  You can buy more farmland, and all kinds of things, and you still have 100 acres of farmland at the end of 100 years.”    —  Warren Buffett on CNBC’s Squawk Box

   Farmland is a tremendous long-term investment and, like most alternative investments, you can get some idea of its value by who chooses to buy it.  America’s biggest farmland owner is now Bill Gates.  The self-avowed computer nerd owns at least 50,000 acres more than his next closest competitor in the farmland ownership game.  The biggest owner worldwide is the government of the People’s Republic of China.

          Investing in managed farmland is not a get-rich-quick scheme.  However, it is a strategic investment that can create long-term wealth for your family.  Long after you’re gone, your spouse, children and grandchildren will continue to benefit from your foresight.  Not only can you set yourself up with an income-generating asset, but your heirs as well.  How much is it worth to you to know that successive generations will be able to rely on additional income?

          Farmland and timberland purchases have been the investment of choice for hundreds of years; it just hasn’t been an option for most people until now.  The opportunity to own managed farmland for small or medium-sized investors is a relatively new concept.

          By the way, Bill isn’t the only wealthy person to plow (pun intended) his money into farmland.  The top 100 largest American landowners include the likes of Ted Turner, the Ford family and Jeff Bezos.  Although she’s not one of the largest farmland owners, Oprah Winfrey owns an avocado farm.