How to Invest in Farmland (Without Buying a Farm)

How to Invest in Farmland (Without Buying a Farm)

You can invest in farmland by investing in farmland stock, farmland ETFs, farmland REITs, or farmland crowdfunding platforms.

How to Invest in Farmland (Without Buying a Farm)
Farmland

Farmland

Stock Trading

Stock Trading

Real Estate

Real Estate

Whether you've always dreamt of retiring on your own farm, or you simply want to add another alternative asset to your portfolio that can help stabilize your investments, investing in farmland is more accessible than ever. From farmland stocks, ETFs and REITs to new crowdfunding platforms that let you invest in a portion of an operational farm that's already generating revenue, the options for investing in farmland are as abundant as the crops these farmers produce.

Read on to learn how you can make money with farmland, how to invest in farmland without buying a farm, and whether or not investing in farmland is a good idea in 2021.

How do you make money with farmland?

If you're wondering how to invest in farmland, you're probably also trying to figure out how you make money with farmland. There are two main ways you make money by investing in farmland: capital appreciation and regular income.

Capital appreciation occurs when the value of the land you hold increases. If you buy a plot of land for $100,000, hold it for five years, and then sell it for $150,000, that's a return on investment (ROI) of 50% and an annualized ROI of 8.45%. In 2021, for example, the value of US farmland increased by 7% compared to last year.

In addition to this, you can also generate regular passive income with farmland. This can come in several different forms: crop sales, rental income, or dividends. You'll earn a profit on crop sales if you own a farm or a portion of a farm, or if you rent your land out, you'll earn rental income. If you choose to invest in farmland through farmland stocks, farmland ETFs, or farmland REITs, you could potentially earn dividends.

Is it worth investing in farmland?

Adding farmland exposure to your portfolio comes with several major diversification benefits. Agricultural land is one of those sought-after low risk, high return investments that manages to offer returns comparable to the stock market in the long-run while being significantly less volatile. If you'd invested $1,000 into Iowa farmland in 1960 and another $1,000 into the S&P 500, your farmland investment would be doing better today than your stock market investment.

On top of being a relatively stable investment, farmland is also an uncorrelated asset. This means it doesn't follow the same patterns as the stock market, so if your stocks tank during a market crash, there's a good chance your farmland returns could help make up for your losses in other areas. What's more, farmland can act as an inflation hedge. It's positively correlated with inflation, meaning returns tend to go up when prices increase, making it a popular way to keep the profit rolling into your portfolio when inflation starts eating away at your returns.

Another huge benefit of investing in farmland is passive income. In addition to land value appreciation, you can also enjoy the additional stream of regular income that comes from crop sales and/or rental income.

Of course, no investment is perfect. Buying farmland requires a large initial investment and a good deal of agricultural knowledge to get started. What's more, managing a farm—even if you're renting the land out to someone else—is far from hands-off. Luckily, if you're looking for a passive investment with fewer barriers to entry, there are other ways to invest in farmland without having to buy a whole farm.

How to invest in farmland without buying a farm

There are four main ways to add farmland to your investment portfolio without actually buying a farm: farmland stocks, farmland ETFs, farmland REITs, and farmland crowdfunding platforms. Here's what you need to know about each method.

Farmland stocks

Investing in farmland stocks means buying shares of stock in a company that has high levels of exposure to the agricultural sector. These are companies producing agricultural products or involved in agribusiness. Farmland stocks are appealing because they often offer consistent returns, even during economic downturns, thanks to the stable demand for farmland and agricultural products. 

Examples of popular farmland stocks include:

  • Nutrien Ltd. (NTR), a Canadian producer of products used to cultivate crops such as fertilizers and pesticides
  • Scotts Miracle-Gro (SMG), a company that produces consumer gardening products
  • Caterpillar (CAT), a manufacturer of agricultural machinery
  • Corteva, Inc. (CTVA), a producer of agricultural chemicals and seeds
  • Archer Daniels Midland (ADM), the largest corn processing company in the world
  • Bunge Limited (BG), an international exporter of soybeans

Farmland ETFs

If you want to automatically diversify your farmland holdings, you can also invest in the best farmland ETFs. These ETFs are made up of a diversified portfolio of futures contracts with heavy exposure to the agricultural industry. While they don't hold farmland directly, these funds track indexes with holdings in various popular agricultural commodities like corn, wheat, sugar, coffee, soybeans, cotton, cattle, livestock, and more. Keep in mind that futures-based ETFs can be risky.

Examples of popular farmland ETFs include:

  • Invesco DB Agriculture Fund (DBA), with holdings in wheat, corn, soybeans, livestock, sugar, coffee, cocoa and cattle
  • Teucrium Corn Fund ETV (CORN), with holdings in corn
  • Teucrium Agricultural Fund (TAGS), which is a combination of four of the most popular farmland ETFs (CANE, SOYB, WEAT and CORN)
  • Elements Rogers International Commodity Index (RJA), with holdings in corn, wheat, cotton, soybeans, feedstock and livestock
  • iPath Series B Bloomberg Grains Subindex Total Return ETN (JJG), with holdings in five different grains (wheat, soybeans, soybean oil, corn, and soybean meal)

Farmland REITs

If you want to invest more directly in farmland rather than the products it produces or the companies that support it, you can invest in farmland real estate investment trusts (REITs). A REIT allows you to purchase shares in a diversified fund made up of real estate investments, so farmland REITs are funds invested in various land real estate. This land is rented out to farmers who generate regular revenue, so there's potential to earn dividends with farmland REITs.

Some of the most popular farmland REITs include:

  • Gladstone Land Corporation (LAND), which owns 140+ farms spread across 13 different states
  • Farmland Partners Inc. (FPI), which owns 150,000+ acres of land across 16 different states

You can buy farmland stocks, ETFs, and REITs with most stock brokers. The best trading apps and online brokers, like WeBull, are now commission-free and have user-friendly mobile apps that make investing in farmland quick and easy.

webull

WeBull

5.0

Stock Trading

Farmland investing platforms

While buying shares of farmland stock, ETFs, and REITs can mirror the benefits of investing in farmland, they don't always track the same patterns as investing in farmland directly. Often, these funds tend to track the stock market more closely than farmland itself, which reduces the diversification benefits of investing in farmland. Thankfully, there are now crowdfunding platforms that let investors invest directly in farmland without having to manage the land directly.

FarmTogether lets investors choose specific farms or crops that are already being managed and generating revenue. You can then invest in a portion of that farm or crop with as little as $10,000, and you can earn returns in the form of both land value appreciation and land income. You do need to be an accredited investor to invest with this platform.

farmtogether

FarmTogether

5.0

Farmland

FarmFundr is a farm-owner crowdfunding platform that lets accredited investors invest in fractional ownership of US farms with high-profit potential. Investors can see returns from land value appreciation as well as annual returns from crop sales. There are no fees for investors, and you can get started with as little as $10,000.

farmfundr

FarmFundr

Farmland

Is agricultural land a good investment in 2021?

Farmland has been considered a secure, stable investment for decades, and it's still a good investment in 2021. As cities expand and land developers take over every last acre of open space, farmland is only becoming more and more scarce. That scarcity, paired with the necessity of farmland (we all have to eat), makes now a great time to invest in farmland.

Farmland values

According to the USDA, the average US farm real estate value in 2007 was $2,010 per acre. As of 2021, it's now:

Farmland values

Read more

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