The Future of Smart Investment in Agricultural Land

The investment provides a greater chance of making a profit from purchasing farmland; as inflation and interest rates record, the value of farmland can be relied upon to remain steady.

FREMONT, CA: Farmland investment has proven to be one of the top asset classes available to investors, and it's easier than ever to enter the market. Investors will likely ponder the wealth-building benefits of having farmland in their investment portfolio. Farmland maintains pace with the stock market over the same period but with substantially less volatility. Historically, it has outperformed most other asset classes, including gold, bonds, and commercial real estate. Investing in farmland generates excellent returns from agricultural commodities and property. Farmland is a finite and declining resource; investing in agricultural land makes obvious sense. The scarcity exerts steady pressure on the supply, providing price stability.

As an unprecedented number of farmers retire, chances for investors to acquire income-producing land have increased. One of the primary reasons farmland is such a lucrative investment prospect is the range of opportunities to generate income and increase wealth. This is particularly true during periods of elevated inflation. Farmland values have been significantly associated with inflation because farmers earn crop prices when food prices rise, and their property becomes more valuable. Due diligence can assist in locating farm-related assets throughout the food supply chain, including machinery and equipment, produce, grain, livestock, and tobacco enterprises. 

Land value

Increased land values are a big profit generator for farmland investors. According to data from the NCREIF agriculture index, land prices have climbed by an average of more than 6 percent annually over the past five decades, with only five years of declining values. Agriculture is the only low-volatility asset type with such high returns, and this uncommon combination of stability and profit potential attracts the attention of astute investors. Farmland investors don't need to understand crop varieties or how to cultivate food to generate impressive returns. 

Crop yield

While purchasing farmland, they can also generate significant returns by harvesting and selling crops. While crop yields and harvesting times vary, double-digit returns are possible in many regions. Numerous farmers have benefited from the historically high inflation rate, as many commodities, such as wheat, have reached record-high harvest prices. Food is a class of assets that will stay in high demand even as costs skyrocket, which is one of the reasons why farming is such a secure, income-generating investment.

Tax benefits

Some sorts of farmland investments offer tax benefits to the owner. It may be eligible for federal or state-level farming-related tax credits or subsidies or might designate a portion of farmland for conservation. The land must be placed in a trust to conserve its natural resources to qualify for conservation tax credits. More investors recognize the importance of farm-related equities, passive ownership that creates income without labor, and various alternatives to being a full-time farmer. Professionals choose the stocks across multiple farming subsectors, so even a novice with limited knowledge of farmland can profit from this real estate investment.

Agricultural private equity

Numerous private equity funds invest primarily in agricultural and food production. As food costs continue to rise, these funds have become more attractive to investors and have increased in quantity and scale. Farmland can generate passive income by purchasing real estate investment trusts (REITs). Both private and publicly traded farmland REITs offer agricultural investment benefits and stock market benefits. Using this investment strategy, they acquire shares in companies that own a farming portfolio and profit from the resulting returns.

Land returns are maximized by agricultural specialists cultivating and harvesting the land. It is not essential to be an agriculture specialist to generate a substantial income from farmland investments. Agricultural partners manage the real estate, property, and equipment, harvest and pack the crops, and handle sales, allowing them to accumulate passive riches in the farming industry. The investment ownership structure provides more diversification via low investment minimums and various agricultural assets. It is desirable to investors as they acquire direct land ownership in a particular farm instead of shares in a company or fund.