Agricultural investment has performed a lot 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 the same time, climate change, land degradation and development have eaten into the method of getting 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 over the last decade กระทรวงเกษตรและสหกรณ์, whilst the human race has consumed more grain than we have produced for seven out of the last eight years. Institutional investors like Jim Rogers have been using farmland investment as a powerful inflation hedge for years and Mr. Rogers has been often quoted as saying that agricultural investment, in the form of farmland investment, is just about the best overall asset for investment this of this new decade.
So what is the best agricultural investment, and how do investors with access to smaller pots of capital participate in agricultural investment and utilise the low risk, high returns investment strategy that has been employed by institutional investors for many years?
Many structures can be found on the open market for retail investors, with options to decide on form including farmland investment, investment funds and operating a farm yourself and selling crops. You might also need a range of geographic area on which to concentrate including Eastern Europe, the UK and the US. Selecting the most appropriate agricultural investment is determined by 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 kind 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 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 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 type of buy to let deal structure allows smaller investors to participate in agricultural investment in quite similar way as institutional clients have done, so long as the smaller investors can source investment farmland.
You can find farmland investment products that design risk out of agricultural investment, with tenant rent to buy options, allowing the farmer tenant to buyback the farmland form the first investor after a fixed time period. This gives the investor with an exit strategy and it can be possible to create in further risk mitigation by securing a minimum buyback price into the rental contract with the farmer.
So, For me, 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 place paying rents and with the choice to get the land for a minimum price in a couple of years time. Within my search for the best farmland investment, location is vital and the fundamentals of the UK farmland market are extremely favourable right now.
The very 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 place to ensure a minimum risk level for the investor.