Farmland Historical Performance
Farmland has demonstrated strong absolute returns over the past several decades. It averaged ~11% total annual returns (income + price appreciation) from 1992 to 2023.
Data are based on annual total returns from January 1, 1992 through December 31, 2023.
Sources: Privately Held U.S. Farmland - NCREIF Farmland Index; Privately Held U.S. Commercial Real Estate - NCREIF Real Estate Index; Stocks - S&P 500 Total Return Index; Bonds - Bloomberg Barclays U.S. Aggregate Index; Gold - LBMA Precious Metal Prices. Indexes are unmanaged and not available for direct investment.
As of now, there are two farmland Real Estate Investment Trusts (REITs) in the United States: Gladstone Land Corporation (LAND) and Farmland Partners Inc. (FPI). These farmland investment opportunities are influenced by broader market dynamics and have exhibited historically higher volatility than direct farmland investments as represented by the NCREIF Farmland Index.
Market Indexes | NCREIF Farmland | Farmland Partners ($FPI) | Gladstone Land Corp ($LAND) |
|---|---|---|---|
Average Annual Return | 7.31% | 1.45% | 3.68% |
Volatility | 2.86% | 29.78% | 49.92% |
Sharpe Ratio | 2.095 | 0.004 | 0.047 |
Data are based on annual total returns from January 1, 2014 through December 31, 2023.
Sources: Privately Held U.S. Farmland - NCREIF Farmland Index; Publicly Traded U.S. Farmland REITs - Gladstone Land Corporation, Farmland Partners Inc. Indexes are unmanaged and unavailable for direct investment.
As the world’s population grows at an unprecedented rate while farmland acreage continues to shrink, long-term food and water security is a critical concern. To feed our rapidly growing population, farms will need to significantly increase their productivity and efficiency.
Sources: Food and Agriculture Organization of the United Nations (FAOSTAT)
The increasing scarcity of farmland and its lack of correlation with other asset classes make it an exceptionally strong diversification tool for virtually any portfolio. This has driven institutions to significantly increase their investments in farmland over the last 30 years.
Sources: NCREIF Farmland Index - Growth in Market Value and Property Count, 1992 - 2023
Beyond 60/40: Allocating to Alternatives
An allocation to farmland can help reduce overall volatility while improving returns.
100% Traditional Portfolio
7.91% average annual total returns
- Bonds 40%
- Stocks 60%
11.10%Standard Deviation
0.47Sharpe Ratio
Adding Only Farmland
8.30% average annual total returns
- Farmland 15%
- Bonds 34%
- Stocks 51%
9.40%Standard Deviation
0.60Sharpe Ratio
Adding Farmland & Real Estate
8.16% average annual total returns
- Real Estate 10%
- Farmland 10%
- Bonds 32%
- Stocks 48%
8.94%Standard Deviation
0.61Sharpe Ratio
Data are based on annual total returns from January 1, 1992 through December 31, 2023.
Sources: Farmland Values: NCREIF Farmland Index, Real Estate Values: NCREIF Property Index, Stocks Values: S&P 500 Index, Bonds Values: Bloomberg Barclays US Aggregate Bond Index
Research
Introduction to Farmland Investing
In this paper, we seek to provide a general understanding of farmland as an asset class and highlight the various financial characteristics that make it a compelling addition to investors’ portfolios.
Is Farmland A Good Investment In a Recession?
In this paper, we look into four US recessions and explore how farmland performed: the Great Financial Crisis in the late 00s, the Dotcom Bubble at the turn of the century, the 1980s Recession, and the COVID-19 pandemic.
California: An Agricultural Powerhouse
In this paper, we analyze California’s value in the agricultural sector, investigate concerns facing the industry, and explore what is being done today to ensure California’s long-term position as an agricultural powerhouse.
Additional Resources
farmland investingThe Case for Farmland in an Inflationary Economy
Gas prices are up to $3.42 a gallon, bacon prices are up 20% from last year, and used car prices are up over 25%. Let's dive into inflation, how it's caused, and how farmland has historically protected investors against it.
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farmland investingFarmland: An Uncorrelated Asset Class
Let’s take a look at why diversification matters, how it has evolved in today’s modern financial environment, and the diversification traits of farmland.
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farmland investingFarmland's Superior Performance Over The Past 30 Years
With the last three decades behind us and a wealth of information now at our fingertips, let’s look back at how farmland investments have performed over the past 30 years.
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