Rooted In Stability: How Farmland Investments Have Outperformed in Uncertain Economic Climates

As the world grapples with a looming recession, persistent inflation, high interest rates, and the recent failure of several major banks, the stock market has become increasingly volatile. Amid this turbulence, one asset class has emerged as a historically resilient and stable investment option: farmland.

Despite the increased economic challenges over the past three years, farmland investments demonstrated remarkable stability, as revealed in FarmTogether’s new study, Farmland: A Historically Stable Asset During Uncertain Times. 

Since 2020, farmland has outperformed most major asset classes such as stocks, bonds and commercial real estate–closing out 2022 with a net positive return of nearly 10%. Meanwhile, real estate returned 5.5%, the S&P 500 returned -18.1% and the Barclays Aggregate Bond Index returned -13%.

Farmland’s performance since the start of COVID-19 is even more attractive on a risk-adjusted basis. From 2020 to 2022, farmland investments experienced a fraction of the volatility of competing assets, demonstrated in the figure below. 

Source: Farmland: A Historically Stable Asset During Uncertain Times. 

Farmland's historically low correlation with conventional assets contributes to its role in portfolio stabilization. Since 2020, farmland has had a negative correlation with most other asset classes. 

Additionally, farmland returns are inherently tied to food prices, which rise in lockstep with inflation. Between 2020 and 2022, farmland’s correlation to the Consumer Price Index (CPI) was 0.97, a near-perfect correlation to rising prices.

Driven, in large part, by the stronger commodity prices seen over the last three years, average cropland values reached a record $5,050 per acre in 2022, up 14% from 2021. Long-term, farmland's supply and demand fundamentals are expected to support steady increases in land values. 

Looking back over the past three decades, the strength and stability of farmland compared to other asset classes become even more apparent. Farmland investments have experienced net positive growth each year for the last three decades.

Average annual returns from 1992 - 2022:

• Farmland: 10.71%
• Real Estate: 8.39%
• US Equities: 9.58%
• US REITs: 9.43%
• US Bonds: 4.74%
• Gold: 5.42%

In the face of continued economic uncertainty, farmland can offer an attractive option for investors seeking to diversify their portfolios into safe-haven assets. Its proven stability and low correlation with other investments demonstrate the resiliency of farmland in any environment. 

FarmTogether's Investment Opportunities

For those interested in diversifying their portfolios with farmland, farmland investment manager, FarmTogether, might be worth exploring. 

Two currently live opportunities on the platform include:

Cardinal Pistachio Orchard: This turnkey, high-production orchard has excellent water fundamentals and benefits from strong domestic and global demand for pistachios. With all development completed, including irrigation, land preparation, and planting, investors can expect cash flows from the mature orchard without additional investments. The fully mature trees are projected to produce at a high rate for decades.

• Target net IRR: 10.3%
• Target net cash yield: 5.1%

Click here to learn more about investing in the Cardinal Pistachio Orchard

Hidden Oaks Organic Vineyard: Located in California's Clements Hills AVA, this turnkey vineyard offers high cash-flowing potential and significant upside. With 88 acres of mature Cabernet Sauvignon vines planted in 2015, the vineyard is situated in an ideal environment for producing premium wines. The rolling hill terroir at Hidden Oaks is perfect for growing tannin-rich Cabernet Sauvignon grapes. 

• Target net IRR: 10.2%
• Target net cash yield: 5.5%

Click here to learn more about investing in the Hidden Oaks Organic Vineyard
For those interested in exploring 1031 Exchange options in farmland, both Cardinal Pistachio Orchard and Hidden Oaks Organic Vineyard are available for consideration through FarmTogether. You can learn more about FarmTogether’s 1031 Exchange program here.

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.