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With continued population growth and increased demand for food, farmland has become a valuable resource. Farmland investing is a great way to benefit from the growing need for farmland, but it can be difficult to find investment opportunities.
Do you want to invest in farmland but don’t want to own it? Are you unsure of how or where to start?
If so, you’ve come to the right place. In this guide, we will discuss the five best ways to invest in farmland.
Why Invest in Farmland?
f you are considering farmland investing, you’re probably wondering if it’s worth the investment. Farmland is one of the oldest asset classes in the United States and a tried and true method for building wealth.
For those thinking of investing in farmland, there are several benefits. First, farmland offers excellent long-term returns. Investors can make money through dividends and capital appreciation.
Farmland has continued to rise in value, so investors can see an increase in their original investment value. In addition, farmland investors can earn a consistent income, and farmland equities provide consistent dividends, even during downturns.
According to AcreTrader, this asset class has provided investors with an 11% average annual return on their original investment.
Second, farmland is a lower-risk option for investors because it offers diversification and is an excellent hedge against inflation since it does not correlate with other asset classes.
5 Best Ways to Invest in Farmland
From online farmland investing platforms to real estate investment trusts (REITs), investing in farmland has never been easier. If you’re looking to get started, here are the five best ways to invest in farmland.
Farmland Investing Platforms
For investors looking to start farmland investing, many online platforms are available that give access to farmland investments. AcreTrader and FarmTogether are two major online marketplaces for investing in farmland.
AcreTrader is an online investing platform that allows you to invest in farmland. This platform is excellent for investors looking for a simple way to earn passive income from farmland; however, only accredited investors can invest with AcreTrader.com
FarmTogether is an online marketplace that allows accredited investors to invest directly in vetted farmland investment opportunities.
A farmland REIT is one that owns and manages a farmland portfolio across the United States. REITs allow investors to earn income passively from farmland without owning or managing the land.
Gladstone Land Corp.
Gladstone Land Corp. is an agricultural REIT that owns and leases farmland and has a portfolio consisting of farmland and agriculture-related facilities, such as storage facilities and packing houses.
Iroquois Valley Farmland REIT
The Iroquois Valley Farmland REIT invests in organic farmland and provides leases and mortgages to next-generation organic farmers.
This farmland REIT acquires and manages agricultural properties and land with development potential. Farmland Partners owns and manages approximately 195,000 acres of farmland, the most of any other REIT.
Agriculture stocks are securities that give investors part ownership in agricultural businesses. Investors can buy and sell these equities on significant stock exchanges.
Archer-Daniels-Midland (ADM) produces agricultural commodities, such as corn, wheat, oilseeds and cocoa. ADM is one of the largest publicly traded companies in the U.S.
Mosaic (MOS) produces potassium and potash fertilizers and animal feed ingredients. MOS is a global enterprise with facilities in six countries, including the United States, Peru and Canada.
John Deere is perhaps the most recognizable name on this list. While many know it as a leading lawnmower brand, the company also manufactures and distributes equipment used in forestry, construction and agriculture.
An agriculture exchange-traded fund (ETF) is a mixture of agricultural stocks and bonds. ETFs have passively managed securities closely matched to a specific benchmark index.
These types of ETFs typically attempt to match or beat the performance of a particular index of agriculture commodities.
Managing approximately $1.96 million in assets, Invesco DB Agriculture Fund is the largest ETF on this list, with holdings in agricultural commodities such as sugar, corn and wheat.
This fund tracks the investment results of agricultural businesses’ global equities. Its top holdings include John Deere, Archer-Daniel-Midland, Corteva and Nutrien.
Teucrium tracks the price of wheat very closely. The fund holds over $205 million in total assets.
Agriculture Mutual Funds
Agriculture mutual funds are similar to ETFs. Agricultural ETFs and mutual funds are a mixture of agricultural stocks, bonds, and other equities. These vehicles are an excellent choice for investors because they offer greater diversification.
However, unlike ETFs, a professional manager actively manages mutual funds, and investors buy them on an exchange at the end of the trading day.
Mutual funds work by pooling funds from multiple investors and using those funds to invest in various equities. Investors can buy mutual fund shares and earn passive income through dividends.
Fidelity Advisor Global Commodity Stock Fund
The Fidelity Advisor Global Commodity Stock Fund holds stocks of companies in the energy, agriculture and metals sector and tracks closely to the MSCI ACWI benchmark.
GMO invests in equities in the natural resources sector. The fund has $2.2 billion in assets, with top holdings in Brazil, the United States, Portugal and the United Kingdom.
The BlackRock fund invests in securities of companies in the natural resources sector. The fund closely matches the S&P Global Natural Resources Index.
Risks of Investing Farmland
While farmland investing is a high-yield asset class that provides excellent returns to investors, it does come with risks. External factors, from farm vacancies to high barriers to entry, may impact returns, so before investing in farmland, you should consider the following risks:
- Vacancy – Farmland can remain vacant for an extended period. As long as the farmland is vacant, it will not generate income for investors.
- Weather – The success of farmland is dependent on weather conditions. Severe weather can hurt crop production, which can put a damper on profits.
- Liquidity – Farmland is highly illiquid. Selling farmland can take months or years, so it is not a great option if you need to access capital quickly.
- High barrier to entry – There is a steep barrier to entry for investing in farmland. Whether you’re looking to own farmland or invest through an ETF or REIT, farmland investing requires a significant amount of capital.
Who Should Invest in Farmland?
Investing in farmland is an excellent investment for any person or investor looking to build wealth and make passive income. It has many attractive benefits, but there are also some risks to consider before investing.
Now that you have learned some basic information about investing in farmland, you are on your way to starting your investing journey. If you’re looking to start farmland investing, use the tips provided in this post to make an informed decision and invest confidently.
Farmland Investing FAQs
We’ve provided a lot of information in this article about ways to invest in farmland. However, if there is still something you’re unclear about, take a look at some commonly asked questions.
What is farmland investing?
Farmland investing involves investing in agricultural lands that produce crops or raise livestock. You can invest directly by owning and operating farmland or indirectly through equities (i.e., REITs, ETFs, or stocks).
Is farmland a good investment idea?
That depends on the investor’s goal. Farmland investments offer several benefits, such as inflation hedges and diversification.
However, there are risks associated with farmland that you should consider before investing.
How can I invest in farmland with little money?
If you don’t have much capital to invest in farmland or own farmland directly, agriculture ETFs, REITs and mutual funds are great low-cost options for investing in farmland.
These equities are also low risk, as they give you diversified exposure to farmland investing.