Agricultural investment has performed a lot better than most 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 supply of 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, whilst 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 been using farmland investment as a successful inflation hedge for years and Mr. Rogers has been often quoted as saying that agricultural investment, in the shape of farmland investment, has become the best overall asset for investment this of this new decade.
So what is the best agricultural investment, and just how can investors with use of 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 many years?
Many structures can be found 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 selection of geographic area which to concentrate 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 kind and structure of each kind of agricultural investment in addition to past performance of one’s target farmland or fund manager, you are able to narrow down your selection to a number of investment projects or strategies.
Deal Structure for Smaller Investors
Smaller investors usually takes part in Agriculture by buying farmland and then renting to a farmer to manage the growth and sale of crops. The investor will own the land and will receive a rental income from the investment as high as 7% per annum, whilst the farmland will be professionally managed, harvested and the crops sold on by the farmer. This type of buy to let deal structure allows smaller investors to be involved in agricultural investment in much the same way as institutional clients have inked, 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 first investor after a fixed time period. This provides the investor by having an exit strategy and it can also be possible to construct in further risk mitigation by securing the very least buyback price to the rental contract with the farmer.
So, I think, the 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 position paying rents and with the choice to buy the land for the very least price in a few years time. In my own search for the best farmland investment, location is very important and the fundamentals of the UK farmland market are extremely favourable right now.
The best agricultural investment then, when it comes to timescale and risk would for me personally, be farmland investment in the UK, with a package structure in position to make certain the very least risk level for the investor.