Farmland as an asset class has many attractive investment characteristics. Not sure what they are? This roundup provides some insights on why adding farmland to a portfolio can be a sound investment.
Competitive total returns
Farmland investments offer the potential for competitive total returns (steady annual cash flow plus appreciation in land values) with low volatility.
Farmland offers equity-like returns over a variety of time horizons, capturing both operating profits and capital growth through a combination of income — either rental income or farming operations — and appreciation in the value of the land.
Diversification
Farmland shows a very low/negative correlation to other asset classes, meaning that even when other investments are in downturns, farmland values typically are very resilient.
Farmland returns have a low or even negative correlation with traditional asset classes such as stocks and bonds, and only a modest positive correlation with commercial real estate, meaning that when other investments are losing value, farmland values often hold steady or perform strongly.
Portfolio benefits
Including farmland in a diversified investment portfolio may increase total return while reducing risk, because farmland prices tend to move independently of stocks, bonds and other types of real estate.
Mean-variance optimization analysis suggests that diversifying traditional portfolios with real assets can help increase total return while reducing volatility.
Inflation hedge
Positively correlated to inflation, farmland historically has performed well and can help preserve capital during inflationary periods.
Farmland prices are positively correlated with inflation, offering an effective hedge against the erosion of purchasing power over time.
Unlike other popular inflation hedges (precious metals), farmland is a hard asset and store of wealth that generates steady income.
Not only does farmland tend to hold its intrinsic value, commodities may outperform during inflation, offering potentially stronger cash streams.
Strong macro tailwinds
Population growth and “food, feed and fuel” demand will support agricultural commodity prices and land values over the long run. At the same time, expanding urban development, pollution, erosion and climate change mean fewer tillable acres in production.
Hertz Farm Management staff believes that increasing “3F” demand for agricultural commodities — to satisfy food, feed and fuel needs — will drive demand for productive land. At the same time, the world may struggle to supply agricultural commodities in sufficient quantities.
At Hertz Farm Management, the team of experts understands the farmland asset class, therefore, they are in a unique position to work with investors who would like to add farmland to their portfolio. Hertz Farm Management invites you to reach out at any time to discuss your interest in investing in farmland.
For more information, please visit hertz.ag/invest.
This content is for informational purposes only and should not be construed as financial advice. The views, thoughts and opinions expressed in this paid post belong solely to the advertiser and do not represent the views of Brand Ave. Studios or its parent company.
