Agricultural investment has performed 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 in 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, as the people has consumed more grain than we’ve produced for seven out from the last eight years. Institutional investors like Jim Rogers have 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 proper execution of farmland investment, is probably the best overall asset for investment this of this new decade.
Just what exactly is the better agricultural investment, and just how can investors with usage of smaller pots of capital take part 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 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 focus including Eastern Europe, the UK and the US. Deciding on the best agricultural investment will depend on how a amount 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 every kind of agricultural investment along with 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 character to control the growth and sale of crops. The investor will own the land and will be given a rental income from the investment all the way to 7% per annum, whilst the farmland will undoubtedly be professionally managed, harvested and the crops obsessed about by the farmer. This kind of buy to let deal structure allows smaller investors to take part in agricultural investment in much the same way as institutional clients have inked, so long as the smaller investors can source investment farmland.
There are 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 initial investor following a fixed time period. This provides the investor by having an exit strategy and it can be possible to build in further risk mitigation by securing a minimum buyback price in to the rental contract with the farmer.
So, For me, the very best investment in agriculture would add a deal structure that designed out the risks of agricultural investment by choosing to invest in farmland with farming tenants already in place paying rents and with the possibility to buy the land for a minimum price in a few years time. In my search for the best farmland investment, location is vital 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 a minimum risk level for the investor.