Agricultural investment has performed much better than most other asset classes throughout history as growing populations demand more food to eat, more feed for livestock and now biofuels. At the same time frame, climate change, land degradation and development have eaten in to the supply of farmland, pushing the scales of supply and demand in the favour of the holding farmland for investment.
Investment into agriculture has consistently provided stable annual returns returns averaging 10% to 15% per annum over the last decade กระทรวงเกษตรและสหกรณ์, because the people has consumed more grain than we’ve produced for seven from the last eight years. Institutional investors like Jim Rogers have been using farmland investment as an effective inflation hedge for a long time and Mr. Rogers has been often quoted as saying that agricultural investment, in the shape of farmland investment, is probably the best overall asset for investment this with this new decade.
What exactly is the greatest agricultural investment, and how can investors with access to smaller pots of capital participate in agricultural investment and utilise the reduced risk, high returns investment strategy that’s been employed by institutional investors for several years?
Many structures are available on the open market for retail investors, with options to choose form including farmland investment, investment funds and operating a farm yourself and selling crops. You might also need a range of geographic area where to focus including Eastern Europe, the UK and the US. Choosing the right agricultural investment is determined by how a period of time you desire to tie up your capital and your attitude to political risk.
After carrying out extensive research and due diligence on the the kind and structure of every form of agricultural investment as well as past performance of one’s target farmland or fund manager, you can narrow down your selection to a handful of investment projects or strategies.
Deal Structure for Smaller Investors
Smaller investors will take part in Agriculture by buying farmland and then renting to a character to handle the growth and sale of crops. The investor will own the land and will be given a rental income from the investment as high as 7% per annum, whilst the farmland will be professionally managed, harvested and the crops obsessed about by the farmer. This sort of buy to let deal structure allows smaller investors to participate in agricultural investment in very similar way as institutional clients have done, so long as the smaller investors can source investment farmland.
There are farmland investment products that design risk out of agricultural investment, with tenant rent to purchase options, allowing the farmer tenant to buyback the farmland form the first investor after a fixed time period. This gives the investor with an exit strategy and it can also be possible to create in further risk mitigation by securing a minimum buyback price in to the rental contract with the farmer.
So, In my opinion, the very best investment in agriculture would add a deal structure that designed out the risks of agricultural investment by choosing to invest in farmland with farming tenants already set up paying rents and with the choice to buy the land for a minimum price in a few years time. In my search to discover the best farmland investment, location is very important and the fundamentals of the UK farmland market are extremely favourable right now.
The very best agricultural investment then, with regards to timescale and risk would for me personally, be farmland investment in the UK, with a deal structure set up to make certain a minimum risk level for the investor.