Owning farmland has been a successful strategy for thousands of years, providing real income in normal times, windfall profits during building booms, and the security of food and shelter in bad times.
As an investment, farmland has historically delivered attractive, diversified, secure, inflation-hedged returns with both current cash flow and long term capital appreciation.
Drivers of Future Demand
Agricultural output will need to double by 2050 to meet growing global food demand, yet compared to 1950 we will have only one-third the available fertile farmland per person. However, current agricultural production is not keeping up with demand. For example, global grain consumption has outpaced total production over the past decade.
Farmland acreage worldwide is decreasing due to development, soil and water depletion, increasing soil salinity and other factors. Meanwhile, demand for farmland production is increasing due to rising population, increasing demand for meat (requiring additional grain for animal feed), and biofuel production mandates consuming corn and other crops. These factors ensure the long-term value of high quality farmland.
In addition, the Partners believe that climate change and water issues will significantly affect food production and agricultural land values, as over two-thirds of freshwater is used for irrigation. A recent U.C. Berkeley study projected that the value of California farmland would drop by “more than half” due to reduced precipitation and shifts in water timing due to reduced snowpack. Farmland with good water and good soil will benefit economically from these types of changes world-wide.
For more information on Farmland LP contact us.