In an Uncertain Market, Farmland Has Historically Held Its Ground

As global markets react to escalating trade tensions and unpredictable policy shifts, investors are reevaluating their portfolios in search of greater stability and long-term resilience. Farmland—particularly permanent cropland—has historically demonstrated strong fundamentals during such periods, offering income, inflation protection, and diversification when traditional asset classes come under pressure.

Stock Market Volatility Is Surging

Over the past month, volatility in public equities has intensified. Following the announcement of sweeping U.S. tariffs—including a 10% universal import tariff^[1] and a proposed 24% tariff on select Chinese goods—equity markets reacted sharply. The Nasdaq Composite has experienced daily swings as high as 5%^[2], with its sharpest drop reaching nearly 6% on April 3rd—its worst single-day decline since the pandemic era. The Cboe Volatility Index (VIX) has surged above 60, and for the first time in over a year, equity market volatility has outpaced that of Bitcoin^[3]—a rare occurrence that underscores the extent of investor unease.

These tariff proposals could have broader implications. Rising input costs, disrupted supply chains, and potential retaliatory measures are contributing to investor unease. The International Monetary Fund recently warned that escalating trade disputes could trigger meaningful corrections in financial markets and lower global growth expectations.

What History Tells Us About Farmland in Turbulent Times

Farmland, by contrast, has shown remarkable resilience through past economic disruptions. During the 2018–2019 U.S.–China trade war, row crops such as corn and soybeans were hit hard by Chinese retaliatory tariffs, with soybean exports to China declining by approximately 75%^[4] in 2018 and shipments nearly halting^[5] altogether in some months. However, permanent crops—like almonds, citrus, and avocados—faced a less challenged fate. These crops tend to have more stable domestic demand and fewer global substitutes, allowing prices to remain relatively steady even amid trade-related volatility. Additionally, exporters of these crops were able to diversify into new markets such as India and the Middle East^[6], helping mitigate the impact of Chinese tariffs. For example, while China imposed a 35% tariff on California almonds, the industry adapted quickly by redirecting supply—illustrating both resilience and market agility.

Farmland’s performance during periods of inflation, rising interest rates, and equity market corrections also tells a compelling story. According to the NCREIF Farmland Index, total farmland returns averaged 10.15% annually over the past 32 years^[7], with a standard deviation of just 6.82%. That compares to the S&P 500’s 10.49% annualized return^[8] but with a much higher standard deviation of 17.59%, highlighting farmland’s historically lower risk profile.

As recent as 2022 when stocks and bonds both posted losses amid interest rate hikes and inflation, farmland held its value. In Q4 2024, the NCREIF Farmland Index posted a modest total return of -1.03%, driven by -3.46% in asset depreciation^[9]. However, it still produced a 2.49% income return, underscoring farmland’s ability to generate yield even when appreciation temporarily softens.

Permanent Crops Can Offer a Strategic Advantage

Understanding the distinction between farmland types is essential. Permanent crops—such as pistachios, almonds, citrus, and avocados—are planted once and harvested annually for decades, offering long-term income potential with less exposure to annual commodity price swings. Unlike row crops that rely heavily on exports, many permanent crops serve stable domestic markets and command premium pricing from buyers seeking consistency in supply and quality.

FarmTogether’s portfolio reflects this strategic focus: 92.8% of the firm’s holdings are in high-value permanent cropland. This tilt may offer insulation from trade-related volatility that more often impacts annual row crops. For example, California avocado growers^[10] have seen sustained domestic demand and reduced competition from Mexican exports in recent seasons. Citrus production in California^[11] is benefiting from improved weather conditions and rising domestic consumption. While national orange production is down—largely due to persistent challenges in Florida—USDA reports^[12] point to favorable conditions for California growers of these commodities. That said, variables such as water availability, labor costs, and regulatory complexity continue to influence grower outcomes across the state.

In regions like California and the Pacific Northwest, where FarmTogether sources many of its investments, permanent crops benefit from long growing seasons^[13] and well-developed distribution infrastructure^[14]. These regions are well positioned to meet increasing demand for nutrient-dense, climate-resilient crops^[15], even as climate change reduces arable land in other parts of the country.

Real Assets for a Real Economy

Beyond performance metrics, farmland’s appeal lies in its fundamentals. As an essential resource tied directly to food production^[16], farmland benefits from long-term tailwinds: rising global population, increasing demand for high-quality nutrition, and shrinking availability of arable land due to climate pressure and urban expansion.

Permanent cropland, in particular, is scarce^[17] and not easily replaced—making it an attractive store of value^[18] in an inflationary environment. These assets generate a biological need for consumers regardless of financial market cycles^[19] and tend to move independently of stocks and bonds. For investors seeking diversification, this non-correlation can be a powerful asset allocation tool.

Preserving Value Through Volatility

At a time when policymakers can reshape market conditions overnight, investors are gravitating toward assets with tangible utility and long-term relevance. Farmland doesn’t just hold its ground during uncertainty—it has historically produced value year after year.

For those looking to explore farmland’s historical performance during economic downturns and how it can serve as a ballast in diversified portfolios, download our Recession Performance White Paper.

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