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 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 during the last decade กระทรวงเกษตรและสหกรณ์, while the people has consumed more grain than we have produced for seven out 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 form of farmland investment, has become the best overall asset for investment this of the new decade.
What exactly is the greatest agricultural investment, and just how can investors with access to smaller pots of capital be involved in agricultural investment and utilise the lower risk, high returns investment strategy that’s been employed by institutional investors for quite some time?
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 also have a range of geographic area which to target including Eastern Europe, the UK and the US. Deciding on the best agricultural investment is determined by how a period of time you wish 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 every form 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 get a rental income from the investment of up to 7% per annum, whilst the farmland is likely to be professionally managed, harvested and the crops obsessed about by the farmer. This sort of buy to let deal structure allows smaller investors to be involved in agricultural investment in quite similar way as institutional clients did, so long as small investors can source investment farmland.
You can find 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 having a fixed time period. This provides the investor by having an exit strategy and it can also be possible to create in further risk mitigation by securing the absolute minimum buyback price into the rental contract with the farmer.
So, I think, the very best investment in agriculture would add a deal structure that designed out the risks of agricultural investment by choosing to buy farmland with farming tenants already in place paying rents and with the possibility to buy the land for the absolute minimum price in many years time. In my search for 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, when it comes to timescale and risk would for me, be farmland investment in the UK, with a package structure in place to make sure the absolute minimum risk level for the investor.