At Terra Ag Ventures, our mission is to provide investors access to high quality farmland investment opportunities in the Southwest while employing sustainable farming practices with respect to water and soil. We’ve been investing in farmland for over 20 years and understand the benefits of having this asset class in a modern and diversified portfolio.
However, although farmland has generated superior returns historically for us and other investors and is an attractive investment for most portfolios, it is also misunderstood and very difficult to access. Over 86% of all farmland is owned by families (much like the single-family home market) with the rest held by large institutional interests including endowments, pension funds, insurance companies, family offices and private equity firms.
The historical returns of farmland investing have been uncorrelated to conventional assets and securities such as stocks, bonds, real estate, timber, and even short-term agricultural commodity prices. Accordingly, the inclusion of farmland in a portfolio increases diversification while providing an attractive hedge against inflation. Additionally, farmland has delivered a higher average annual return than most asset classes in the last 29 years (1992-2020). To summarize in more detail, farmland has:
(2) Low Volatility of Returns (1992 – 2020 / 6.9%)
(3) Uncorrelated with Other Asset Classes (1992 to 2020 / -0.05 to 0.45)
(4) Long-Term Tailwinds (high demand with decreasing supply and recession / inflation resistant
Farmland crops can be divided into two sub-categories, annual row crops and permanent crops. Annual row crops, such alfalfa, corn, wheat, peppers, squash, lettuce, and others, are planted and harvested annually, or more frequently. Permanent crops, such as oranges, almonds, and grapes, have plant structures such as trees or vines that produce crops annually without being replanted.
Row Cropland
Row cropland investments produce annual crops such as corn, soybeans, cotton, wheat, and rice. In general, these have lower annual cash flow yields but less volatility. They typically have shorter harvest periods and involve lower upfront capital expenditure. The crop decisions are made annually providing additional flexibility for farmers to react to relatively current market conditions.
Permanent Cropland
Permanent cropland investments, our focus here at Terra Ag, include perennial crops such as fruit and nut crops, which have both pre-productive and mature periods. Pre-productive or “greenfield” investments must mature before they reach economic profitability. Some permanent crops, like almonds, peak in productivity and then decline so orchard age is an important factor in estimating productivity and value. Others, such as pistachios and pecans, take longer to reach economic profitability but can produce an economically viable crop for over 50 or 100 years. These crop types have longer investment horizons and offer opportunities for higher profitability and higher yields but also carry higher risk.
Farmland Values
Farmland values began rising in 1988 and, except for single-year declines in 2009 and 2016, have continued rising. Additionally, since 2000, the NCREIF Farmland Income Index, which tracks the value of U.S. farmland, has more than tripled. A similar positive trend in farm income growth and appreciation of land values occurred in other major crop-producing regions, such as South America, Oceania, and Europe.
Regionally, farmland values vary widely because of differences in general economic conditions, local farm economic conditions, government policy and local geographic conditions that affect returns to farming. Cropland values are highest in the Pacific region with California ($12,900/acre) and Arizona ($7,650/acre) having the highest value cropland as of 2020.
Farmland Values by Region
USDA
Food Demand
The world currently faces a global supply-demand imbalance with regards to food production. As the global population continues to rise, with expectations of reaching 9.7 billion by 2050, approximately 70% more food will be required than is consumed today. Additionally, it is estimated that only 7% of the Earth’s land is suitable for cultivation with most of the world’s productive arable land already in crop production. With increasing food production needs and decreasing land suitable for cultivation, this will create a supply-demand imbalance.
Alongside the rise in global population and growing food production needs, increases in income per capita is driving higher daily caloric intake. 2.3 billion people currently consume 2,000 to 2,500 kilocalories per day; however, this number is expected to drop to 683 million by 2030 as consumers transition to diets of 2,500+ kilocalories per day. This shift in consumption will be most prevalent in developing nations such as India and Africa, which remain 30% below current U.S. average consumption levels.
Rising Demand for Nutritious Food
Food and Agriculture Organization
In addition to the increase in population and caloric intake, consumer preferences are evolving to include a greater emphasis on nutritious foods due to a better understanding of health benefits and higher income per capita. Within the U.S. and the developing world, this growing awareness of the importance of what people eat and its influence on a healthier lifestyle is driving demand for fresh, wholesome foods. In the U.S., more than half of Americans report trying to consume more protein, fiber, whole grains and vitamins and minerals in their diets.
Driven by rising demand for food, decreasing land supply, low correlation with other assets and historically strong performance, it is thus not a surprise that more investors are looking to access farmland as an investment opportunity. As with other types of real estate, farmland investors also benefit from tax savings through depreciation. At Terra Ag, we’re excited to see this investment opportunity become more mainstream with investors looking for ways to diversify and earn solid returns.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
