Want To Protect Your Portfolio From A Recession? Some Say Buy Farmland

Many experienced investors collectively roll their eyes when they hear someone touting a hedge against inflation, mainly because there are few sure things. However, one historically reliable investment opportunity – farmland – is picking up speed lately as a go-to due to its limited availability coupled with increasing food demands.

Historically, farmland has been considered to have reasonably stable investment returns. As the U.S. inflation rate spun between 8.5% and 9.1% in 2022, agricultural manufacturers recently reported that labor and transportation costs increased by 7.9%. In turn, prices of commodities such as corn and soybean increased by 60%, outpacing the higher input prices.

On the whole, farmland returns have performed exceptionally well during inflationary times in the past 50 years, averaging 6.1% above inflation. 

According to the United States Department of Agriculture (USDA), despite farmland investments being historically hard to access, the total valuation of all farm sector assets in the United States is expected to increase to $3.31 trillion in 2022. Over the last several decades, this growing value has presented a massive opportunity for investors.

Buy It If You Can Find It

But here’s the catch – farmland has remained a historically stable investment and hedge against inflation because it's a limited resource with looming supply concerns. Mark Twain’s investment advice, "buy land, they're not making it anymore,” has held up through the ages based on demand and because the country is so dependent on food production. 

As farmland value has steadily increased over the last several decades, its “inflation-proof” reputation has continued to grow. Its historically low volatility compared to the stock market and other popular assets can also be a lure for investors trying to avoid large fluctuations in stock values. 

During the pandemic's beginning, while most investment options swung mightily, rural residential and farmland values spiked by 14% between 2021 and 2022, according to the USDA. This increase was bolstered by high agricultural commodity prices and increasing scarcity.

The pandemic has also highlighted the importance of farmland’s two income streams – ongoing cash payments through lease agreements and crop sales, which can help shield investors from wild financial swings. 

Adding Farmland To Your Portfolio

One company is giving investors a way to add farmland to their portfolio without needing to purchase and manage an entire farm themselves.

FarmTogether, a farmland investment manager, provides access to direct investments in agricultural land, such as its recently completed offerings for a corn and soybean farm in Nebraska and an organic vineyard in California, through its equity crowdfunding platform. The crowdfunded offerings are available to accredited investors and have minimum investments starting at just $15,000.

The company also launched its Sustainable Farmland Fund earlier this year to offer exposure to a diversified portfolio of institutional-grade farmland through a single investment. 

100% of FarmTogether's acreage is enrolled and certified annually through the Leading Harvest Sustainability Standard, verifying that its portfolio is being managed sustainably through outcomes-based evidence and third-party audits.

Learn more about how farmland can fit into your investment strategy through FarmTogether’s website.

See also: An Examination of Farmland Performance During Four US Recessions

Image by Rudy and Peter Skitterians from Pixabay

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