Why invest in farmland

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The more unstable the world becomes economically, financially and geopolitically, the more people will put their money into commodities and precious metals. This is less of an economic phenomenon than one of extreme prudence by people less intent on growing wealth than preserving wealth.  

Land of all types is a finite resource, and fertile land with access to water is even more finite. Values of agricultural land — cropland and pasture — have been increasing steadily since the mid-1980s but more sharply since June 2007. Analysts see this as the early days of a burgeoning bull market in agriculture. There is a very broad group of investors who are not satisfied with the traditional allocations that they've had, be they stock, bonds, index funds whatever, and the increasing flow of capital, mid-teen to double digit returns and a projected growth trajectory of at least 10 years or more presents farmland now as a more valuable investment. Fund managers say farming is appealing to many investors now because it provides a hedge against inflation and is not correlated with financial assets. They find people are obsessed with real assets now and want things they can touch.  

Demand for land and farm-oriented investments grows because of the strong fundamentals, notably heightened concerns about food security in the face of a growing world population, linked with the fact that the top one-third of our income distribution has discretionary cash. The Economist reported recently that a combination of rising incomes and population in developing countries could increase demand for protein intake by more than 5% annually for years to come. These are long-term sustainable trends.  

Different to most other agriculture schemes currently in the marketplace, this is not a speculative investment but one that has fixed returns. One where private investors have the opportunity to invest in agricultural land that is already in production, producing and selling its crops.  

Large tracts of farmland in North Eastern Argentina are owned by family run businesses that passed it on since generations, and are totally debt free. Funds are raised not to purchase the land but to bring additional fertile land owned into production, and creating contractually guaranteed returns for the investor in the process. 

In order to minimise the level of risk it is being offered at a one third discount of its value, plus an additional one-quarter of the land is being placed in trust in case of default. 

This investment scheme was started in 2007 and has since been paying its investors the fixed annual payments on time under the watchful eye of a UK legal and financial firm who acts as the investor’s agent. 

Other than the agricultural land as security, exists the fact that this land was owned by families throughout generations and is to remain in their possession to eventually pas it on to their children. Therefore one can consider the ultimate security lies in the fact that these families will do whatever it takes to fulfil their contractual obligations in order to buy back their land at the end of the term.  

Investors will find this a very sound investment model that maximises return and shrinks risk to a minimum, providing a clear exit strategy, all under supervision of an independent company that holds the title and is governed by English law.