Farmland: A Strategic Asset for Sustainable Impact and Long-Term Returns

As economic uncertainty and environmental challenges escalate, investors are turning toward asset classes that can provide resilient financial performance and alignment with sustainability objectives. Farmland has emerged as a compelling investment, offering historically stable, long-term returns and the potential to drive meaningful environmental and societal impact.

By directing capital to farmland, investors can support innovative and regenerative agricultural practices that can enhance long-term profitability, promote risk mitigation, and address climate-driven resource constraints. Thus farmland can be positioned as a strategic cornerstone in both traditional and impact-driven portfolios.

Why Farmland is Gaining Momentum

Farmland’s unique combination of financial and environmental advantages differentiates it from other asset classes:

Consistent Performance in Uncertain Times

Historically, farmland has demonstrated consistent and strong performance, even during periods of economic stress. From 1992 to 2023, U.S. farmland generated an average annual return of 10.52%, outpacing many other major asset classes, including real estate (7.84%), equities (10.07%), bonds (4.67%), REITs (9.21%), timberland (8.72%), and gold (5.67%)[1]. This performance has been achieved with significantly lower volatility—only 6.61% annually compared to the S&P 500’s 17.71%—demonstrating farmland’s resilience as a stable, long-term asset.

Farmland’s resilience was particularly evident during crises such as the 2008 financial downturn, when it delivered positive returns while other markets faltered. Similarly, in 2022, while the S&P 500 declined by over 18% and bond markets experienced their worst performance in decades, the NCREIF Farmland Property Index posted a 9.60% return, driven by strong commodity markets and supply constraints. Farmland has also proven to be a strong hedge against rising prices during periods of inflation.  From the onset of the COVID-19 pandemic through 2022, farmland returns showed a 0.97 correlation[2] with the Consumer Price Index, underscoring its ability to maintain value and generate returns even in times of economic volatility.

Favorable Long-Term Outlook

Looking forward, the long-term outlook for farmland remains highly favorable. With global food demand projected to rise by 60% by 2050, and arable land per capita shrinking, farmland values in prime agricultural regions are expected to continue to appreciate. The USDA reports that in 2022 alone, U.S. cropland values increased by 14.3% to a record $5,050 per acre, with some states experiencing gains of over 25%.

Meanwhile, as urbanization, soil degradation, and climate change reduce the availability of productive farmland, the pressure on existing agricultural land is set to intensify. This constrained supply, coupled with the increasing need to maximize agricultural output, positions farmland as a reliable source of long-term capital appreciation. Investors in regions known for high productivity and strong infrastructure—such as the Corn Belt, California’s Central Valley, and parts of the Pacific Northwest—are particularly well-positioned to benefit from this ongoing appreciation and scarcity.

Strategic Alignment with ESG Goals

In addition to its financial benefits, farmland plays a key role in the rise of sustainable investments. According to Bloomberg, global ESG assets are expected to exceed $50 trillion by 2025, and at present, investors are more focused on aligning their portfolios with sustainability objectives. Farmland investments can meet these objectives across resource efficiency, carbon-conscious farming, and advancements in sustainable water management. As sustainable investment options grow, farmland’s capacity to deliver financial and environmental outcomes reinforces its appeal to institutional investors looking to mitigate long-term risks while meeting ESG requirements.

How Farmland Investments Can Help Drive Sustainability

Capital allocations enable sustainable practices that can enhance farmland’s productivity, environmental resilience, and overall viability. Below are several ways that farmland investments can contribute to sustainable outcomes:

1. Enhancing Soil Health for Long-Term Productivity: Investments in sustainable farmland facilitate practices like crop rotation, cover cropping, and precision fertilization, which can improve soil health, reduce erosion, and enhance soil matter. These methods help ensure that farmland remains productive and resilient over time, supporting both stable financial returns and sustainable food systems. 
2. Optimizing Crop Yields and Resource Efficiency: Farmland investments promote advanced agricultural technologies that can increase crop yields and improve resource efficiency. Precision agriculture tools, for instance, utilize satellite imagery and AI-driven analytics to optimize planting and reduce inputs like water and fertilizers, helping the land remain both economically viable and environmentally sustainable. Precision agriculture alone can reduce water and fertilizer use by up to 30% without compromising yield. Additionally, efficient irrigation systems, such as drip irrigation, can reduce water use by up to 50% compared to traditional methods, directly benefiting regions prone to water scarcity. 
3. Supporting Sustainable Growth for Farmers and Rural Communities: Investment capital also provides critical resources to farmers, enabling sustainable methods that might otherwise be financially inaccessible. For example, transitioning to organic certification or implementing regenerative practices can be cost-prohibitive for many farmers. Farmland investments offer the necessary funding for these transitions, helping strengthen rural economies by fostering resilient agricultural businesses capable of withstanding market fluctuations and environmental challenges. 

Securing Farmland’s Role in the Future of Sustainable Investing

As global focus on sustainability intensifies, farmland has emerged as a valuable asset for investors seeking to drive meaningful environmental impact. Farmland investments offer a strategic solution to pressing challenges in food security and sustainability while delivering historically strong, stable financial returns and contributing to a more resilient agricultural future.

[1] Privately Held U.S. Farmland - NCREIF Farmland Property Index; Privately Held U.S. Commercial Real Estate - NCREIF Real Estate Index; Equities - S&P 500 Total Return Index; Bonds - Bloomberg Barclays U.S. Aggregate Index; Publicly Traded U.S. REITs - FTSE Nareit U.S. Real Estate Index; Privately Held U.S. Timberland - NCREIF Timberland Index; Gold - LBMA Precious Metal Prices.

[2] Consumer Price Index - Urban; Privately Held U.S. Farmland - NCREIF Farmland Index