A bulletproof asset
The elite are prepared for the worst, are you?
We’re obsessing over solutions for a declining human population, but the more immediate threat is the additional 2 billion people we will have to feed 25 years from now.
Global food production must increase by almost 50% to meet this demand.
Then, we have to consider geopolitical crises, climate disasters, and black swan events like COVID, which break trading systems and make growing food even harder.
We’re crammed on a tiny planet fighting for depleting resources, and the world’s billionaires know it.
They understand that when shit hits the fan, what keeps us alive becomes most valuable: clean water, fertile soil, food, and fresh air.
That’s why Bill Gates, Jeff Bezos and Thomas Peterffy own almost 1.3 million acres of US farmland combined.
And that’s why the who’s who of Silicon Valley have come together to buy $800m of land to build themselves an agrarian utopia with an orchard containing a million trees and…. a military base.
Unlike in the Lord of the Rings, this shire wouldn’t be as hospitable to outsiders.
Bulletproof yourself
Warren Buffet once said that the first rule of investing is not to lose money. And the second rule is to remember the first rule.
Farmland as an asset has proven its mettle when preserving wealth in tough economic conditions.
Rising interest rates have crashed the real estate market. However, farmland has seen just a 1% reduction in value throughout 2022-2023. And during inflationary times, like now, rising food prices make farms more profitable.
Beyond saving you from the downside, farmland delivers rental income (when leased out to farmers) and gains from increasing land value. With more land flipping from agricultural to commercial use, its growing scarcity improves its potential:
Investors have seen an average return of 11% annually from 1992-2021
The price per acre of US farmland has gone from $1,270 in 1997 to $5,460 in 2023
There’s a catch
The same climate-related disasters that farmland can protect you from pose its greatest risks.
Lack of usable groundwater, droughts, insect infestations, strong winds, wildfires, and flooding are some examples. Investigating an area’s water access and history of disasters is crucial.
Secondly, crops have volatile prices, making income unpredictable for farmers or land tenants.
This requires keeping a close eye on the numbers and always having enough cash to ride out the low seasons.
Farmland for the everyday investor
The most obvious way to invest would be to buy agricultural land, but this requires a lot of upfront capital and ongoing costs for maintenance. For non-farmers, it would mean finding and managing tenants that would work the land.
Other investment methods require investor accreditation, which locks out anyone with a net worth below $1 million.
The easiest and most straightforward way to access farmland as an investment asset would be to buy into a Real Estate Investment Trust (‘REIT’) - easily done with a brokerage account. One such fund is Gladstone (‘LAND’), which owns and leases out 112.5 million acres of farmland. Another is Farmland Partners (‘FPI’). They own almost 186,000 acres and other farm assets, such as granaries and groundwater rights.
Beyond its potential to sweeten your balance sheet, owning agricultural land comes with the benefits of breathing clean air, eating fresh foods, and getting outside. You’ll appreciate it the next time the world’s locked down from a rogue virus.
Did I miss anything? Do you think owning Farmland can make you more resilient during a crisis? Leave me a comment or hit reply if you’re reading this from your inbox - I would love to hear from you!
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Disclaimer: Material on AltMacro.com and the Alt Macro newsletter is not investment advice but is for general information only. You are solely responsible for making your own investment and financial decisions. Owners of Alt Macro, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission or with any securities regulatory authority.