What attracts investors to farmland? In a word, fundamentals. Rising food prices driven by expanding populations and the increasing wealth in emerging-markets have caught the attention of investors. Consumers in developing nations increasingly have the income necessary to purchase beef, poultry, and other similar products. This has placed a considerable strain on the global agriculture infrastructure, as these food products take more land and other resources to produce the same amount of calories than traditional crops, such as wheat and rice. As a result, the value of farmland has strong underpinnings many expect will hold for the long term.
Another draw is the prospect of inflation. Although farmland is considered an illiquid investment, it is also viewed as a safe haven because of its history as an inflation hedge. Recent economic and geopolitical events have led investors to seek so-called “safe-haven assets” as a means of protecting their purchasing power from the dual ravages of inflation and asset-price depreciation. Investors rely on such assets to provide strong and consistent returns regardless of the inflationary and economic environment.
In the past, Treasury bills, precious metals, and other commodities have been considered safe havens. However, more recently, they have failed to provide all the necessary characteristics. Although other assets have some of the characteristics, few can match the ability of farmland to deliver strong returns in times of economic growth and contraction. Furthermore, the tangible nature of farmland and its role as a productive asset are two factors that combine to make the investment unique among all safe-haven opportunities.
From 1992 through 2011, total returns for the US National Council of Real Estate Investment Fiduciaries Farmland Index shows only one negative quarter. For this reason, an additional benefit to investing in farmland is that it is not as volatile as other vehicles. With only one exception, farmland returns have been consistently positive.
Another draw is the prospect of inflation. Although farmland is considered an illiquid investment, it is also viewed as a safe haven because of its history as an inflation hedge. Recent economic and geopolitical events have led investors to seek so-called “safe-haven assets” as a means of protecting their purchasing power from the dual ravages of inflation and asset-price depreciation. Investors rely on such assets to provide strong and consistent returns regardless of the inflationary and economic environment.
In the past, Treasury bills, precious metals, and other commodities have been considered safe havens. However, more recently, they have failed to provide all the necessary characteristics. Although other assets have some of the characteristics, few can match the ability of farmland to deliver strong returns in times of economic growth and contraction. Furthermore, the tangible nature of farmland and its role as a productive asset are two factors that combine to make the investment unique among all safe-haven opportunities.
From 1992 through 2011, total returns for the US National Council of Real Estate Investment Fiduciaries Farmland Index shows only one negative quarter. For this reason, an additional benefit to investing in farmland is that it is not as volatile as other vehicles. With only one exception, farmland returns have been consistently positive.
0 коммент. :
Отправить комментарий