|Soybeans on LandFund Partners' property. The Nashville|
firm manages 25,000 acres worth more than $100 million.
Farmland, a safe bet for investors, "is a $2.4 trillion sector in the U.S., which is the world's leading agricultural exporting country," Ward writes. "Generally, as the price of goods produced using agricultural commodities rises, the value of farmland also increases. And with the average age of U.S. farmers around 58 and less than one percent of the nation's farmland owned by institutional investors, companies see a lot of opportunity to expand their portfolios."
Since 1970 "farmland produced an average return of 10.27 percent, which according to the TIAA | Center for Farmland Research at the University of Illinois, reflects cash rent plus capital gains less property taxes," Ward notes. "Comparatively, the S&P 500 returned 6.79 percent during that period, while the NASDAQ gained 9.63 percent."
Todd Kuethe, an agricultural economist at the University of Illinois, "cautioned that investing in farmland isn't for everyone," Ward reports. "That's in part because farmland is expensive to buy and sell in transactions that require a large amount of time to identify a buyer and complete a sale." Kuethe told Ward, "There's an old joke: 'It's a get rich slowly investment.' It's a way of managing wealth across a couple of generations."
While land prices have dipped in recent years along with the global downturn in commodity prices, "Kuethe still sees a positive long-term outlook for land prices and growth for investing in farmland,'" Ward writes. He said, "By 2050, we will have nine billion people on the planet. Globally, we'll have to almost double our food producing capability. As people get wealthier, they get more of their calories from protein, which means more feed is required for livestock and also means that more crops has to be grown."