Agricultural investment has performed better than other asset classes throughout history as growing populations demand more food to consume, more feed for livestock and now biofuels. At the same time frame, climate change, land degradation and development have eaten to the method of getting 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 during the last decade กระทรวงเกษตรและสหกรณ์, as the human race has consumed more grain than we’ve produced for seven out of the last eight years. Institutional investors like Jim Rogers have now been using farmland investment as a highly effective inflation hedge for years and Mr. Rogers has been often quoted as saying that agricultural investment, in the shape of farmland investment, is just about the best overall asset for investment this with this new decade.
So what is the greatest agricultural investment, and how can investors with use of smaller pots of capital take part in agricultural investment and utilise the lower risk, high returns investment strategy that has been employed by institutional investors for quite some time?
Many structures can be found 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 selection of geographic area on which to target including Eastern Europe, the UK and the US. Deciding on the best agricultural investment depends on the way the period of time you need 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 in addition to past performance of your target farmland or fund manager, you can narrow down your selection to a small number 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 player to manage the growth and sale of crops. The investor will own the land and will get a rental income from the investment of up to 7% per annum, whilst the farmland will soon be professionally managed, harvested and the crops sold on by the farmer. This type of buy to let deal structure allows smaller investors to take part in agricultural investment in very similar way as institutional clients have done, provided that the smaller investors can source investment farmland.
You can find farmland investment products that design risk out of agricultural investment, with tenant rent to buy options, allowing the farmer tenant to buyback the farmland form the original investor following a fixed time period. This gives the investor having an exit strategy and it is also possible to construct in further risk mitigation by securing the absolute minimum buyback price to the rental contract with the farmer.
So, In my opinion, the most effective investment in agriculture would incorporate a deal structure that designed out the risks of agricultural investment by choosing to invest in farmland with farming tenants already in place paying rents and with the possibility to purchase the land for the absolute minimum price in a couple of years time. Within 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 most effective agricultural investment then, when it comes to timescale and risk would for me, be farmland investment in the UK, with a package structure in place to ensure the absolute minimum risk level for the investor.