Farmland: A Superior Asset Class
Farmland has demonstrated strong absolute returns over the past several decades. It averaged ~11% total annual returns (income + price appreciation) from 1992 to 2022.
Value of $1000 Investment 1992 - 2022
Data representative through December 2022.
Sources: Privately Held U.S. Farmland - NCREIF Farmland Index; Privately Held U.S. Commercial Real Estate - NCREIF Real Estate Index; Stocks - S&P 500; Bonds - Bloomberg Barclays U.S. Aggregate Index; Gold - Federal Reserve Bank of St. Louis Economic Data (FRED). Indexes are unmanaged and unavailable for direct investment.
Farmland has historically been one of the best inflation hedges. The NCREIF Farmland Index’s Total Return has consistently provided returns more than double the inflation rate since before 1992.
NCREIF Farmland Returns vs. Inflation (% in 1992 - 2022)
Data representative through December 2022.
Sources: NCREIF Farmland Index and the Consumer Price Index - Urban.
The inception date of the NCREIF Farmland Index is Q4 1990. The CPI-U produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services since 1913. NCREIF Farmland Index returns are used for the time frame above to demonstrate income and capital appreciation components, which are not available from the TIAA-CREF Center for Farmland Research database.
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.
Population Growth & Declining Arable Land Per Person
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.
Institutional Farmland Investing Growth