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 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, since the people has consumed more grain than we’ve produced for seven from the last eight years. Institutional investors like Jim Rogers have now been using farmland investment as a fruitful inflation hedge for years and Mr. Rogers has been often quoted as saying that agricultural investment, in the shape of farmland investment, is just about the best overall asset for investment this with this new decade.
Just what exactly is the greatest agricultural investment, and just how can investors with usage of smaller pots of capital participate in agricultural investment and utilise the low 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 choose form including farmland investment, investment funds and operating a farm yourself and selling crops. You might also need a variety of geographic area where to target including Eastern Europe, the UK and the US. Choosing the right agricultural investment is determined by the way the period 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 sort and structure of every type of agricultural investment as well as past performance of one’s 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 player to manage the growth and sale of crops. The investor will own the land and will get a rental income from the investment as high as 7% per annum, whilst the farmland is likely to be professionally managed, harvested and the crops sold on by the farmer. This type of buy to let deal structure allows smaller investors to participate in agricultural investment in much the same way as institutional clients have done, provided the smaller investors can source investment farmland.
You can find 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 original investor following a fixed time period. This allows the investor having an exit strategy and it can be possible to construct in further risk mitigation by securing a minimum buyback price into the rental contract with the farmer.
So, I think, the best investment in agriculture would add a deal structure that designed out the risks of agricultural investment by choosing to buy farmland with farming tenants already in position paying rents and with the option to buy the land for a minimum price in many years time. In my search to discover the best farmland investment, location is essential and the fundamentals of the UK farmland market are extremely favourable right now.
The most effective 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 position to make certain a minimum risk level for the investor.