Agricultural investment has performed much better than almost every other asset classes throughout history as growing populations demand more food to eat, more feed for livestock and now biofuels. At once, climate change, land degradation and development have eaten into the way to obtain farmland, pushing the scales of supply and demand in the favour of those 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, since 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 a successful inflation hedge for decades and Mr. Rogers has been often quoted as saying that agricultural investment, in the proper execution of farmland investment, has become the best overall asset for investment this with this new decade.
Just what exactly is the better agricultural investment, and how can investors with usage of 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 many years?
Many structures are available on the open market for retail investors, with options to select form including farmland investment, investment funds and operating a farm yourself and selling crops. You might also need a variety of geographic area where to focus including Eastern Europe, the UK and the US. Choosing the right agricultural investment will depend on how the length 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 type and structure of each type of agricultural investment along with past performance of your target farmland or fund manager, you are able to narrow down your selection to a small number of investment projects or strategies.
Deal Structure for Smaller Investors
Smaller investors can take part in Agriculture by buying farmland and then renting to a player to control 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 soon be professionally managed, harvested and the crops sold on by the farmer. This kind 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.
You will find farmland investment products that design risk out of agricultural investment, with tenant rent to get options, allowing the farmer tenant to buyback the farmland form the original investor after having a fixed time period. This gives the investor by having an exit strategy and it is also possible to construct in further risk mitigation by securing the absolute minimum buyback price into the rental contract with the farmer.
So, In my opinion, the very best investment in agriculture would incorporate a deal structure that designed out the risks of agricultural investment by choosing to purchase farmland with farming tenants already in place paying rents and with the possibility to purchase the land for the absolute minimum price in many years time. Within my search to discover the best farmland investment, location is essential and the fundamentals of the UK farmland market are very favourable right now.
The best agricultural investment then, in terms of timescale and risk would for me personally, be farmland investment in the UK, with a package structure in place to make certain the absolute minimum risk level for the investor.