Anyone investing in farmland?

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

Post Reply
User avatar
jason
Executive Member
Executive Member
Posts: 248
Joined: Mon Jun 10, 2013 4:10 pm

Anyone investing in farmland?

Post by jason » Sun Oct 24, 2021 10:14 pm

I've read in multiple places that the smart money is investing in farmland. It's supposedly fairly recession-proof and inflation-proof. Apparently, Bill Gates is the biggest owner of farmland in the US. I just bought some shares of the REIT Gladstone Land Corporation (ticker LAND) which is apparently the biggest farmland REIT that is publicly traded. Thoughts on this investment?
User avatar
Hal
Executive Member
Executive Member
Posts: 1349
Joined: Tue May 03, 2011 1:50 am

Re: Anyone investing in farmland?

Post by Hal » Mon Oct 25, 2021 3:20 am

Ex-country Yokel here :D

Personally I wouldn't touch a Farm REIT with a ten foot barge pole. Buy some small acreage yourself and lease it out instead.
I have seen many of these "investments" collapse first hand eg. https://www.abc.net.au/news/2015-10-17/ ... gs/6862060

Do a short course at a technical/Ag college so you know the basics before you purchase. You will learn soil types, best position / orientation etc
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
User avatar
StrategyDriven
Senior Member
Senior Member
Posts: 135
Joined: Thu Jul 09, 2020 5:58 pm

Re: Anyone investing in farmland?

Post by StrategyDriven » Mon Oct 25, 2021 2:17 pm

You might want to check out Meb Faber's podcast, he talks about farmland investing fairly often and has interviewed a few people who run money in that area. I didn't search for those episodes but imagine you can search his podcast for farmland and find it pretty quickly.
jswinner
Full Member
Full Member
Posts: 52
Joined: Sat May 22, 2010 1:35 pm

Re: Anyone investing in farmland?

Post by jswinner » Fri Oct 29, 2021 12:26 am

Yes, I like it and the crops, especially the berries, the farms produce. I have held some of this for about 5 years now as part of my variable portion, and overall it has done well, but it is a microcap so the price does move around
sweetbthescrivener
Full Member
Full Member
Posts: 64
Joined: Wed Jul 12, 2017 4:53 pm

Re: Anyone investing in farmland?

Post by sweetbthescrivener » Fri Oct 29, 2021 12:32 pm

This looks interesting. Organic Farmland fund with annual returns of 10%

https://fortune.com/2021/04/15/bill-gat ... t-resnick/
A groundbreaker to watch is Farmland LP, America’s largest investment manager of organic farmland (you can find out more about investing with them here). It’s following a highly individual strategy: purchasing at good prices high-quality ground that was mainly devoted to industrial production of commodity crops such as corn. Farmland LP then transitions the spreads to higher-value harvests. Today, its 40-crop menu encompasses wine grapes, blueberries, and a full array of organic vegetables and grains. That produce garners a big premium from grocery chains, vineyards, and food manufacturers whose customers increasingly prize what’s natural, healthy, and grown under strict green standards.

Farmland LP now manages 15,000 acres of organically cultivated land worth $175 million, comprising 12 farms from 64 to 6,000 acres concentrated in three clusters in Northern California and the Pacific Northwest: the Golden State’s San Joaquin Valley, a hour’s drive east from San Francisco; the fertile Willamette Valley south of Portland, Ore., home to grapes for Pinot Noir; and Walla Walla in southeast Washington. These areas offer the most diverse farming in the U.S., as home to over 300 different crops.

Its model clearly works, but investors need an extremely long horizon to profit. Farmland’s first fund that raised $35 million in 2011––and bought $50 million in farmland––is, believe it or not, a 30-year vehicle. So far, it has delivered annualized returns of around 10%. Investors can sell their shares at values based on the appraised value of the farmland every six months. “But 95% of the shareholders have stayed in,” says CEO and founder Craig Wichner. Those 10% gains sound modest, but Farmland delivered them with only one-third leverage. That’s less than half the typical level for office, apartment, and warehouse projects. And its returns are extremely steady.

The funds are structured to back-load the bumper returns. For the just-launched second round that now holds over $90 million in land under management, and initially runs eight years, Wichner expects cash payouts to reach 11% by 2028, and land prices to substantially appreciate owing to the increased cash flow. The income farmland generates is based on the value of crops grown on that land. By converting from low-income to far more lucrative crops, Farmland greatly increases cash flow per acre, an upgrade that also makes the land more valuable.

Investors must hold their shares for the full period. Then they are free to sell and reap the capital gains from the run-up in land prices, or stay in the fund to receive payouts. Farmland would compensate the departing investors either by selling farms, or by adding debt on existing properties. That’s comparable to refinancing your house with a small mortgage when its value jumps in a great market. Or investors can retain their stakes after the fund’s initial term and keep collecting rising dividends, plus benefits from what should be a steady ascent in prices.

Farmland’s success raises the question, if its formula is so terrific, why aren’t lots of funds using it? “It’s a difficult model to implement,” says Sherrick. “Organic soil is very location and soil specific. You can’t grow corn in Canada, nor convert central Illinois to blueberries and wine grapes.” He notes that Wichner chose the Pacific Northwest in part because its climate welcomes such a wide spectrum of crops. You also need patient investors because it takes so long to win the USDA’s organic seal of approval. Under the agency’s guidelines, no farm can be certified until at least three years after it last deployed conventional farming materials such as chemical pesticides and herbicides. Hence, going organic requires patient investors willing to receive no cash flow over the first three years.
https://www.farmlandlp.com/
ppnewbie
Executive Member
Executive Member
Posts: 850
Joined: Fri May 03, 2019 6:04 pm

Re: Anyone investing in farmland?

Post by ppnewbie » Mon Nov 15, 2021 6:50 pm

I've talked to the farmland LP folks a few times. I've gone over the prospectus and a had CFA take a look and it was legit. But ultimately, I decided to pass. I may swing back around and do it but with I Bonds paying 7.12 percent I'm going the easy route. Also, the tax stuff and distributions on this kind of thing are a little painful.
User avatar
bitcoininthevp
Executive Member
Executive Member
Posts: 465
Joined: Fri Sep 25, 2015 8:30 pm

Re: Anyone investing in farmland?

Post by bitcoininthevp » Thu Dec 02, 2021 8:39 am

Hal wrote:
Mon Oct 25, 2021 3:20 am
Do a short course at a technical/Ag college so you know the basics before you purchase. You will learn soil types, best position / orientation etc
Are there online courses that you would recommend?

I assume much of land selection is regional so would you recommend in person class in the area that you plan to buy? Or something else?
Post Reply