Agricultural investment has performed better than 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 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 during the last decade กระทรวงเกษตรและสหกรณ์, while the people 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 successful inflation hedge for decades 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 best agricultural investment, and just how can investors with use of smaller pots of capital be involved in agricultural investment and utilise the reduced 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 decide on form including farmland investment, investment funds and operating a farm yourself and selling crops. You might also need a selection of geographic area on which to target including Eastern Europe, the UK and the US. Selecting the most appropriate agricultural investment depends on how the length 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 every form 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 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 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.
There are 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 original investor after having a fixed time period. This gives the investor with an exit strategy and it can be possible to construct in further risk mitigation by securing a minimum buyback price in to the rental contract with the farmer.
So, For me, the most effective 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 purchase the land for a minimum price in a few years time. Within my search for the best farmland investment, location is vital and the fundamentals of the UK farmland market are very favourable right now.
The very best agricultural investment then, with regards to timescale and risk would for me, be farmland investment in the UK, with a deal structure in place to make sure a minimum risk level for the investor.