Here’s a fact that may surprise you: Bill Gates is the largest private owner of farmland in the United States. It is estimated he owns ~270,000 acres of farmland across dozens of American states.
Farmland has been an incredible asset class, and importantly for investors, largely uncorrelated to the economic ups and downs of the stock market. At the same time, it remains largely misunderstood. This article offers a primer on investing in farmland.
In the past 30 years, US farmland has delivered a higher average annual return than the other major US asset classes (stocks, bonds, real estate). It is also an asset class that offers both income (by selling what it produces) and capital growth (as the land (hopefully) gets more valuable over time).
The challenge for everyday investors is that farmland has traditionally been an expensive and inaccessible asset class. But more and more funds are being listed on the share market that have greatly improved accessibility. For example, there is Rural Funds Group (ASX: RFF) which owns and leases out farms growing cotton, almonds, macadamia, cattle, poultry and vineyards. For those that can invest in the US market, two other REITS are Gladstone Land (NYSE: LAND) and Farmland Partners (NYSE: FPI).
None of this is to say that farmland will be a particularly good investment going forward. Past performance does not guarantee future results. But it is an important reminder that the stock market gives us access to far more opportunities than just stocks – all range of weird and wonderful assets are available at the click of a button.
This is an excerpt from our Thought Starters email. Once a week we send you 5 interesting articles that have caught our attention, to get you thinking. No spam, we guarantee.