- Organic certification – Ensuring that no synthetic inputs such as pesticides or antibiotics are used. Consumers are increasingly recognizing the Organic certification and its food safety and health benefits.
- Sustainable production practices – Producing food that is safer for consumption and better for the environment, such as raising grass-fed beef without the use of antibiotics.
- Locally grown – Guaranteeing fresher and more nutritious products that are produced within local food sheds. Consumers prefer locally grown food two to one over food produced elsewhere.
Cropland Acreage Declines While Population Increases
While the population of the United States has doubled since 1950, farmland acreage has generally declined since the 1930s. The expansion of cities and suburbs is now accelerating loss of farmland. Between 1997 and 2007, 49 million acres, about 11%, of U.S. cropland was lost. For perspective, it takes about one acre of cropland to feed one person in the United States today. As population continues to grow in the United States, productive farmland will become increasingly valuable.
Historical Farmland Total ReturnsFarmland has historically delivered strong investment returns, comparing favorably with other traditional asset classes. The NCREIF Farmland Index, which measures the investment performance of agricultural properties in the United States, has generated an 11.83% compound return since 1992. Farmland return is driven by consistent and increasing demand for farmland products.
Limited Organic Farmland
The U.S. Organic food market has experienced rapid growth over the past two decades, with sales growing at an average of 17% annually, from $1 million in 1990 to over $29 billion in 2012. Despite rapid growth, Organic foods represent less than 4.0% of food sales in 2010, reflecting a market that can continue to grow at $5 billion per year for the foreseeable future.
Meanwhile, conversion to certified Organic cropland in the U.S. is occurring much more slowly than the increase in market demand. Of the 900 million total farmland acres in the U.S. only 0.5% (4.8 million acres) was certified Organic as of 2008. As a result of supply shortfalls, prices for Organic goods typically receive a premium of 50% to 200% over their conventional counterparts.