Agricultural investment has performed much better than almost every other asset classes throughout history as growing populations demand more food to eat, more feed for livestock and now biofuels. At the same time frame, climate change, land degradation and development have eaten to the method of getting farmland, pushing the scales of supply and demand in the favour of the holding farmland for investment.
Investment into agriculture has consistently provided stable annual returns returns averaging 10% to 15% per annum during the last decade กระทรวงเกษตรและสหกรณ์, as the people has consumed more grain than we have produced for seven out from the last eight years. Institutional investors like Jim Rogers have been using farmland investment as a successful inflation hedge for a long time and Mr. Rogers has been often quoted as saying that agricultural investment, in the form of farmland investment, is probably the best overall asset for investment this of this new decade.
Just what exactly is the better agricultural investment, and how do investors with usage of smaller pots of capital take part in agricultural investment and utilise the reduced risk, high returns investment strategy that’s been employed by institutional investors for several years?
Many structures are available 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 also have a range of geographic area which to concentrate including Eastern Europe, the UK and the US. Deciding on the best agricultural investment depends on how the length 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 type and structure of each form of agricultural investment along with past performance of your target farmland or fund manager, you can narrow down your selection to a handful of investment projects or strategies.
Deal Structure for Smaller Investors
Smaller investors may take part in Agriculture by buying farmland and then renting to a farmer to handle the growth and sale of crops. The investor will own the land and will get a rental income from the investment of up to 7% per annum, whilst the farmland is likely to be professionally managed, harvested and the crops obsessed about by the farmer. This sort of buy to let deal structure allows smaller investors to take part in agricultural investment in much the same way as institutional clients did, provided small 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 first investor after having a fixed time period. This gives the investor by having an exit strategy and it is also possible to build in further risk mitigation by securing the very least buyback price to the rental contract with the farmer.
So, I think, the most effective investment in agriculture would incorporate a deal structure that designed out the risks of agricultural investment by choosing to purchase farmland with farming tenants already set up paying rents and with the option to get the land for the very least price in a couple of years time. Within my search for the best farmland investment, location is very important and the fundamentals of the UK farmland market are very favourable right now.
The very best agricultural investment then, when it comes to timescale and risk would for me personally, be farmland investment in the UK, with an offer structure set up to make sure the very least risk level for the investor.