I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.
With fluctuating stock prices and increasing interest rates, many investors are concerned about the safety of their retirement funds and other savings.
In this context, is farmland a good investment? Historically, farmland and cropland investments have been reliable investments in unstable economic periods.
They have performed better than other stock options during recessions, especially because farmers may receive subsidies from the federal government.
Why You Should Invest in Farmland
Farmland can be an excellent stock to have, especially in times of volatility. Here are the most significant benefits of farmland investing:
- Portfolio diversification: Agriculture is a challenging asset class to represent in your portfolio without a specific farmland investment.
- Hedge against inflation: Farmland is an excellent hedge against inflation. Crop prices and farmland returns tend to keep pace with inflation, which protects investors against their money losing value.
- Tax advantages: Farmland is essential, so the U.S. government often subsidizes food-based cropland to protect Americans during recessions.
- Stability: U.S. farmland investments have had similar returns to conventional stock options since 2000, but with low volatility.
- Passive income: If you have someone else manage your farmland or buy into a crowdfunded option, farmland can be a passive investment.
- High demand for food: Food is one of only a few commodities without flexible demand. People will always need to eat, and no trend, economic change or recession will change that.
Why You Should Not Invest in Farmland
Farmland is a highly illiquid investment, and it is extremely difficult to predict how it will perform — much of how a crop does in any given year depends on the weather and other unpredictable factors.
These are the major drawbacks you should keep in mind when considering investing in farmland:
- Liquidity: Real estate, including farmland, is an illiquid investment. There is very little opportunity to pull out of farmland investment options early if you need your money back.
- Commodity price fluctuations: Agricultural commodities can fluctuate in price. For example, soybeans were as high as $15.86 per bushel in April 2021, but only $12.21 by October of the same year.
- A decline in land values: The United States Department of Agriculture says that farmland value declines are rare but not unheard of. It’s possible to lose much or all of your investment if farmland prices take a hit.
- Supply chain issues: Recent supply chain issues mean that shipping crops can take longer than normal, adding to the risk of losses.
- Climate change: Increasing climate fluctuations make farming riskier than ever before. Land that has produced well and had high yields may become not farmable in just a few years.
- Steep learning curve: Farming is a complex, multifaceted task that can take years to understand fully. If you plan to purchase cropland directly, be prepared to work on your land full time.
Best Farmland Investment Platforms
There are a few different ways to invest in farmland. Some farmland investors go all in by buying farmland, while others contribute to REITs whose portfolios focus on cropland.
If you’re wondering how to invest in farmland, these are two of the best farmland investment platforms. Note that both properties require you to be an accredited investor, which requires you to have a net worth of at least $1,000,000 or an income above $200,000.
Acretrader allows farmers to apply for funding for expansions, refinancing or improvements. It then offers accredited investors the opportunity to support farmers in these opportunities while taking over the effort of collecting repayments.
FarmTogether is a farmland investment management platform that allows investors to crowdfund and purchase acres of already-managed agricultural land.
The minimum investment to become a farmland partner with FarmTogether depends on the property you want to invest in, but all minimum investments are at least $15,000.
FarmTogether enables accredited investors and institutions to invest directly in high-quality farmland assets vetted by rigorous, institutional due diligence and active asset management.
Is Farmland a Good Investment for Me?
Farmland investing is a good way to hedge against inflation and protect yourself in the event of an economic downturn. Historically, farmland has been an excellent investment during times of high volatility.
Remember that just because farmland has historically performed well does not mean that it always will — do your due diligence, and never invest more than you can afford to lose.
If you’re looking for a way to represent food production and agriculture in your investment portfolio, consider talking to your financial advisor about farmland investing.
These are the most commonly asked questions about farmland investing.
What type of farming makes the most money?
There is no simple answer to which crop types make the most money. Profits typically depend on the weather, markets and other crops’ success rate.
However, complex grows such as mushrooms, micro greens, lavender and saffron have the highest profit margins.
Is it profitable to buy farmland?
Though past performance is never a guarantee of future results, over the last two decades, farmland has kept pace with stock market investments, with the added benefit of less volatility.
Is farmland a good investment during a recession?
Farmland typically fares better than other asset classes during economic recessions, making it a popular choice for those worried about instability.
I'm Donny. I'm a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.More Posts