Agricultural investment has performed better than almost every other asset classes throughout history as growing populations demand more food to consume, 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 these holding farmland for investment.
Investment into agriculture has consistently provided stable annual returns returns averaging 10% to 15% per annum throughout the last decade กระทรวงเกษตรและสหกรณ์, because 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 already 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 form of farmland investment, is probably the best overall asset for investment this of the new decade.
What exactly is the better agricultural investment, and just how can investors with usage of smaller pots of capital be involved in agricultural investment and utilise the reduced risk, high returns investment strategy that has been employed by institutional investors for several years?
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 selection of geographic area which to focus including Eastern Europe, the UK and the US. Deciding on the best agricultural investment will depend on how 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 each type of agricultural investment as well as past performance of one’s 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 may 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 all the way to 7% per annum, whilst the farmland is likely to be professionally managed, harvested and the crops obsessed about by the farmer. This kind 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 small investors can source investment farmland.
You will 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 a fixed time period. This provides the investor with an exit strategy and it can be possible to construct in further risk mitigation by securing a 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 invest in farmland with farming tenants already in position paying rents and with the choice to buy the land for a minimum price in a few years time. In my search to discover the best farmland investment, location is vital and the fundamentals of the UK farmland market are very favourable right now.
The most effective agricultural investment then, in terms of timescale and risk would for me, be farmland investment in the UK, with a package structure in position to make sure a minimum risk level for the investor.