INVESTMENT DIVERSIFICATION THROUGH AGRICULTURAL REAL ESTATE
PLANTING THE SEED FOR THE FUTURE
Diversification through agricultural real estate investment offers stable and predictable diversification. Agricultural real estate provides cash flow from crop income and appreciation in the market value of the land. Ownership of a tangible asset and recreational opportunities are intangible qualities that also provide value.
With the ever changing geopolitical landscape, the Fed operating in uncharted territory with the unwinding of Quantitative Easing, International Governments racing to devalue their currencies, and equity markets at all-time highs, portfolio diversification has never been more important
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AGRICULTURAL REAL ESTATE VS. TRADITIONAL REAL ESTATE
1. Good farmland is like beach front property, they aren’t making any more of it. The graph to the right indicates that in the last 100 years, acres of land in farms has actually been decreasing due to urban sprawl. The decrease in tillable acres makes the market supply decrease while demand for tillable land increases. Net result is increasing underlying value of the asset.
2. The graph to the right also illustrates that large agricultural corporations are buying smaller parcels of land creating mega farms. Small parcels (40 & 80 acre) are becoming increasingly scarce as agribusiness consolidates the available acres.
3. Agricultural land is not subject to over-zealous home builders building more supply than buyers. Farm land is also immune to regional economics (think houses in Detroit) as the commodity the land produces is priced on a global market with global demand. Everyone needs to eat.
4. A corn stalk never trashed the land, nor has a soybean ever called in the middle of the night to complain about a broken toilet. Passive real estate income without the worry of maintenance or eviction issues.
