LandFund’s farm management team has decades of experience and currently manages 24,000 acres of farmland in the lower Mississippi River Valley. LandFund targets this region for its pricing fundamentals, abundant groundwater, improving crops yields, diverse crop mix, and low transportation costs to export markets.
Over the past 20 years, row crop farmland has returned 11% on an annualized basis. Further, farmland returns have been non-correlated with major asset classes such as stocks and bonds. Investing in farmland can diversify returns, increase a portfolio’s Sharpe ratio, and improve portfolio efficiency. Click here to see 20 year correlation charts.
Supply & Demand Dynamics
Global demand for food crops is increasing due to growing populations and dietary changes. Experts currently estimate that to keep pace with demand, global agricultural productions will need to increase 60% by 2050. However, crop yields show signs of a plateau, and the supply of irrigated farmland is limited. Increased demand and constrained supply leads to higher prices.
Farmland is a physical asset with intrinsic value. Physical assets help investors reduce systemic risk in their portfolios. Further, many investors experience additional peace of mind knowing that a tangible, productive piece of earth is anchoring their investment.
Annual Cash Returns
LandFund leases its properties to experienced farmers in return for annual cash rents. These annual rents are used to pay property expenses, and the remaining cash is distributed to investors. Fund I and Fund II are currently making 3% annual cash distributions.
Farmland produces crops that are denominated in US dollars, such as corn and soybeans. This means that during inflationary periods the prices of these commodities can rise dramatically. In turn, this leads to higher farmland rents and higher farmland values.
To learn more about the macroeconomic fundamentals affecting U.S. farmland prices, click here to read John R. Farris’ article “Here’s Why U.S. Farmland Returns are Consistently High” as published by Business Insider.