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Farmland is often seen as a risky asset class because it doesn’t always correlate to broader stock markets. But there are ways to make money without buying a farm. In fact, some people do just that.
Investing in farmland is a great way to diversify your investments, especially if you live somewhere where real estate prices aren’t soaring. You can buy farmland, rent it out, or even buy shares on a farm REIT.
You might think that you have to actually own a farm to reap the benefits of investing in farmland, but that isn’t true. Land itself can appreciate in value, and you can collect rents from farmers. Plus, you can use platforms like Acretrader or FarmTogether to crowdfund farmland opportunities.
Is Owning Farmland a Good Investment?
Farmland ownership is one of the oldest forms of wealth preservation and growth. And it’s still one of the best ways to preserve and grow wealth today. As long as there are people hungry for food, land will always be needed to produce it.
The average investor has no idea how to invest in farmland and is often confused about what constitutes “investing.” There are many misconceptions about farmland investing and why you should consider adding it to your portfolio. Here are some facts about farmland and why it makes sense for everyone to include it in their portfolio.
The reason why farmland performs so well is because it provides five key advantages:
1. Diversification – Investing in farmland provides diversification to your portfolio of other assets including stocks and bonds. By investing in farmland through the means we explain below, you’ll hold value in underlying farmland itself and earn revenue from farm rents.
2. Lower Volatility – Farmland is less volatile as an asset than stocks because the value of the land will appreciate over time.
3. Hedging – Farmland investing provides a hedge against inflation because even as prices rise, the price of foods produced on farmland will also rise.
4. Income – While farmland doesn’t pay dividends, it does generate income. Some farmers sell off a small percentage of their crop each year to cover expenses and reinvest the remainder into future crops. Others rent out their land to agri-businesses. Either way, the landowner makes money whether the price of vegetables rises or fall.
5. Tax advantaged – Depending on how you invest in farmland, primarily direct land ownership, you can also reap tax benefits, keeping more money in your pocket.
Invest in Farmland Today
West Coast U.S. Farmland
Access to a secondary market
South American Farmland
Open to non-accredited investors
How Does Investing in Farmland Work?
Investing in farmland can work in a number of key ways. Whether you’re looking to invest in farmland ETFs or REITs through your brokerage account, check out a new farmland crowdfunding platform, or buy farmland outright to rent it out to farmers, there are opportunities to invest in farmland which could work for any investor.
When choosing a farmland investing opportunity, it’s important to pay attention to fees, how much you have available to invest, and how much time you can devote to your investments.
Below we’ll cover the key ways to invest in farmland in 2023.
The 5 Best Ways to Invest in Farmland
There are a number of key ways to invest in farmland which can work for any type of investor, whether you’re looking for passive investing or active investing opportunities. Read on to learn the best ways to invest and why they may be right for you.
Investing in farmland used to mean purchasing land outright. But over the past few decades, investors have found another way to participate in the agriculture industry: investing in farmland REITs.
And while there are still plenty of opportunities to buy individual farms directly, farmland REITs offer several advantages that make them attractive to investors.
Farmland REITs are structured like stocks and each share represents ownership in a particular piece of farmland. Ownership in REITs allow you to own percentages of farmland across the portfolio, decreasing your risk and allowing access to income through REIT dividends. Your return depends on the performance of the entire portfolio of properties held by the REIT.
Farmland REITs to consider owning include:
Gladstone Land (LAND)
Gladstone Land is a public farmland REIT which owns land across 15 states in the United States. This REIT offers a dividend yield of 2.36%.
Farmland Partners (FPI)
Farmland Partners is another public REIT which owns land across 18 states whose farms produce 26 different crops. FPI offers a dividend yield of 1.69%.
Farmland LP is a private farmland REIT which is focused on organic farming practices. This REIT is only available to accredited investors and the minimum investment is $50,000.
The rise of crowdfunding has made it easier than ever for investors to directly buy shares of farmland. These crowdfunding companies allow investors to own private shares which represent percentages of farmland ownership.
Through this ownership, investors can benefit through gains in the value of these shares as well as dividends from rent farmers pay to the land-owning crowdfunding platforms.
Two prominent farmland crowdfunding platforms investors should consider are Acretrader and FarmTogether.
AcreTrader is a crowdfunding platform which allows individuals to invest in pieces of farmland anywhere in the nation. Investors choose a parcel of land and pay a one-time fee to become a shareholder. Once purchased, shareholders receive regular dividends based on the amount of rent generated by the farm. Shareholders can cash out anytime during the investment term.
Read our full review here.
FarmTogether is a new platform that allows people to invest in small-scale farms without having to commit to owning a full farm. Instead, investors purchase fractions of a farm — usually one acre — where they receive a portion of the profits earned from growing crops such as corn, soybeans, wheat, and more. Investors can choose how much of each crop they want to grow and sell.
FarmTogether works similarly to Acretrader.com. Instead of purchasing stock, however, you own fractions of a farm.
Read our full review here.
Buy Farmland Directly
The most obvious way to invest money into farmland is to directly purchase useful cropland or pasture land and rent it out to farmers or ranchers. This type of farmland investing can be cost-prohibitive to most investors and requires a lot of active time and labor to yield results.
Another issue with this investing route is the risk tied to owning one piece of land rather than diversifying your investment in many parcels of land through crowdfunding or REIT ownership.
Before embarking on buying land directly, you should evaluate how much money you need as a down payment, consider where you’ll buy farmland and whether it’s near you, and learn how difficult it will be to find a farmer tenant for your land.
Investors looking to invest in agriculture stocks can look to a number of publicly traded companies that operate in the industry. Some of these companies are involved in growing crops while others work with farmers to help process agricultural products into food or feed.
There are also companies that either manufacture equipment used by farmers or provide insurance and financial services for farmers. In addition to these public companies, there are privately held businesses that specialize in specific types of farming operations such as dairies, cattle ranches, and vineyards.
Here are three agriculture stocks you should consider exploring.
Deere & Co (DE) – John Deere is an American company which manufactures agricultural equipment and other machinery used for farmland work. This valuable corporation is tied to the output of the farmland industry as its equipment is used across the United States for agricultural work.
Zoetis Inc. (ZTS) – Zoetis is an American company which is the world’s largest producer of medicine and vaccines for livestock as well as pets. This company is tied to the output of the farmland industry as farmers across the United States depend on Zoetis’ medicine and vaccines for their livestock.
Nutrien LTD (NTR) – Nutrien is a Canadian company which produces fertilizer and fertilizer ingredients including potash and nitrogen. This company’s fertilizers are used by farmers to provide nutrition to their lands to increase output.
The agriculture industry is one of the most important sectors within the economy. In fact, it accounts for nearly 15% of the global GDP. This is why some investors want to invest in the agrifood space.
One of the best ways to invest in the agribusiness sector includes exchange traded funds (ETFs). These types of investment vehicles offer investors diversification benefits, while still allowing them to track specific indexes. Here are two popular agribusiness ETFs you might want to look into.
VanEck Agribusiness ETF (MOO):
MOO invests in stocks of companies involved in the production and distribution of food, feed, and fiber products. The MOO focuses on companies that derive at least half of their revenue from agriculture. Companies like Archer Daniels Midland Company (ADM), Tyson Foods (TSN US), and Bayer AG (BAYN GR) are among those included in this basket.
Teucrium Soybean ETF – (SOYB):
SOYB seeks to provide exposure to the price movements of soybeans. Soybeans are used for animal feed and biofuel, and the demand for both continues to rise.
Frequently Asked Questions
Is there an ETF that invests in farmland?
There are a number of ETFs which provide exposure to farmland investing through ownership of companies tied to the agriculture industry like farm equipment, through agriculture futures, and to products like animal feed and medicine, and fertilizer.
ETFs like this include VanEck Agribusiness ETF (MOO) and Teucrium Agricultural Fund (TAGS).