August 18, 2020

Myths Debunked About Farmland

by Sara Wensley

Director, Growth and Marketing

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Myths Debunked About Farmland
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Misconceptions about farmland get in the way of excellent investment opportunities. Here, we break down some of the top myths to set the record straight so investors can make educated decisions, diversify their portfolios, and get the most out of their investments.

Misconceptions about farmland can get in the way of a compelling investment opportunity. Here, we break down some of the top myths to set the record straight.

Myth #1: Farmland is controlled by big corporations and the wealthy.

Historically, farmland hasn’t always been available to anyone as an investment opportunity. But, that’s not due to a stigma tied to risk or wealth. Instead, it’s because of a lack of access. Farmland has traditionally stayed within the family, being handed down from generation-to-generation.

With growing concerns over factory farming and a continuous decrease in arable land, the question of who owns America’s farmland often arises: families own 97% of US farmland. However, with the average age of farmers approaching 60, and younger generations exploring different career routes other than the taking over the family business, more farmland is entering the market. Experts anticipate 25% of farmers and ranchers will retire by 2030 and roughly one-third of US farmland and ranch land will likely change hands in the next 15 years.

This boom in land ownership transfers and the introduction of investing technology like FarmTogether allow for the democratization of farmland ownership. With modern farmland investing, anyone can invest in farmland and have a say in what practices are being used.

Myth #2: Farming is innately harmful to the environment.

It’s true that farming can be harmful to the environment, contributing 9% of the world’s carbon emissions. However, agriculture can also have profoundly positive impacts on the environment too. Many farmers and investors are working to minimize negative agricultural effects and achieve net zero emissions. With regenerative farming practices, farmland can become richer and absorb more carbon.

In a recent post, we reflect on how unsustainable agricultural practices have been relied on in response to the global food scare. These practices have harmful, lasting effects on the environment, and are likely to lead to more intense competition for natural resources and increased greenhouse gas emissions.

As these environmental effects are becoming harder to ignore, increasing concerns over disappearing farmland and soil health, farmers are being driven to implement regenerative practices.

Regenerative farming provides alternatives to the unsustainable agriculture we've experienced to date. Many farmers are normalizing complex crop rotation, crop and livestock diversity, intercropping, and cover-crops, as well as minimizing soil disturbance. These operational improvements help to reduce carbon emissions by promoting soil and root health. Farmers and investors have a chance to reverse the stigma against farming and the environment by promoting regenerative agriculture.

Myth #3: To meet supply farms need more land and heavy inputs.

It’s assumed that with more land and heavy inputs, farmers will see the best returns. However, if the soil isn’t taken care of, farmers are kicking a dead horse.

For example, a recent study claims the amount of land required for farming could be cut in half if farmers used high-nutrient inputs and reallocation of crops on present cropland. This could optimize land investments, reduce land-recovery time, and deter land grabbing within and outside of the US.

Current practices limit farmland’s arability. Agricultural land makes up about a fifth of the country; however, much of the cropland is “left idle to let the land recover.”

Let’s dive into this a bit deeper.

While obtaining more farmland may imply more yields for farmers, success really depends on how farmers use the land they already have. The need for more land and the use of heavy inputs are often responses to ineffective soil care and crop management. With soil, quality should trump quantity in order to see the best returns.

The truth is, heavy tillage and chemical inputs cause soil to function improperly. Although often implemented with good intentions (namely, more predictable yields), the benefits of over-tilling and synthetic inputs are short-sighted.

In fact, these processes prevent farmers from getting the most out of their cropland by robbing the soil of its natural nutrients, as well as its abilities to absorb carbon and moisture. And over the last century, tilling and heavy machinery use have cut the average topsoil levels in some parts of the US between 8-10 inches.

To corporations, the convenience of the status quo wins. But farmers and investors know this is not sustainable.

Organic matter and soil carbon are necessary to manage water and prevent erosion. But, in one example from the Land Stewardship Project, intensive tillage is responsible for cutting organic matter levels from 10-15% to below 2% in Midwestern prairie soils. And inputs like chemical pesticides and fertilizers kill the naturally occurring nutrients in the soil.

Soil sequestering practices make for healthier land, while minimizing the need for land expansion. Healthy soil needs regenerative practices, which avoid the use of over-tilling and chemical inputs. Regenerative practices make soil reusable and resilient, cutting down the need to expand and making land investments smarter and more condensed. Farmers are able to do more with less land.

Myth #4: Investing in farmland is risky.

The truth is, any investment has its risks.

However, thanks to modern investment tracking and decades of analytics, we’re able to see that farmland is more stable than most investment types. While yields and other assets fluctuate, farmland has proven resistant to inflation and reflects growing value.

Average U.S. farm real estate value

Farmland is a safe and stable long-term investment for many reasons. Aside from being an inflation hedging investment, it provides diversification from other assets, and has less volatility than commercial real estate. Over the past 30 years, investors have averaged 11.5% annual returns, while typically avoiding or minimizing debt. And that holds true even in times of recession.

Farmland’s appreciating value is due to rising populations and the growing need for food, as well as the shrinking available US land due to land preservation, climate change, and urbanization (which converts 1 million acres annually).

At FarmTogether, we minimize risk and get investors higher returns.

Backing a better future

The world will always need food, but we also need sustainable and regenerative methods to get that food. That’s what makes FarmTogether such a safe, stable, and rewarding investment platform.

We connect you with sustainable and green investment opportunities so can you count on competitive returns, all the while knowing you’re backing a better future in agriculture.

Interested in Learning More About Farmland as an Asset Class?

Click here to see farmland's historical performance, visit our FAQ to learn more about investing with FarmTogether, or get started today by visiting ways to invest.

Disclaimer: FarmTogether is not a registered broker-dealer, investment adviser or investment manager. FarmTogether does not provide tax, legal or investment advice. This material has been prepared for informational and educational purposes only. You should consult your own tax, legal and investment advisors before engaging in any transaction.

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