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Investing in Farmland – A Beginner

 

Investing in Farmland – A Beginner

Farmland investing is the hot ticket of the moment, with investors at all levels,

from institutional funds such as Schroders and Barings investing millions of pounds,

to smaller retail investors with a few thousand looking for good quality farmland to invest in. invest.

Investing in Farmland
Investing in Farmland

Whether you have access to 50 million or 20,000,

there are projects and strategies available on the open market to suit your budget and requirements,

from the UK to Australia and Ukraine to South America,

all subscribing to different investment strategies. investment, and some less credible in terms of final value than others.

Investing in Farmland – A Beginners Guide to the UK

One part of the current trend that alarms me is the apparent rush by retail investors to invest in offshore farmland,

buying titles or leases with little or no understanding of the true value of the underlying asset.

For which they are signing off with hard-earned cash.

Agricultural land produces soft commodities (food) and as such,

the value of the land is intrinsically linked to current price trends for any commodity produced by that land, along with a host of other factors.

Currently, food commodity prices are at a forty-year low, indicating huge scope for growth in the value of soft commodities,

and therefore of the underlying asset that produces them, although investors inexperienced seem to be buying or

leasing farmland outside their country of residence with no credible regulated appraisal insight, seemingly in love with the story of growth and earnings,

without really understanding the fundamentals behind the investment on agricultural land, risk, or exit strategy.

Investing in Farmland - A Beginner
Investing in Farmland – A Beginner

UK Farmland Investment

When I talk to clients daily about the relevance of investing in farmland as part of an overall low-risk strategy,

I believe it’s more important that investors understand the fundamentals behind investing in farmland,

more importantly, investors must have sufficient knowledge to decide whether investing in farmland is an appropriate asset allocation strategy to meet their own needs.

These are some of the general profiles of investors who should or should not investigate the possibility of investing in agricultural land:

Investing in Farmland – A Beginners Guide to the UK

For this article to be complete and achieve its goal of helping the investor make an informed decision,

it is important to explore the current market conditions that have led to this whirlwind of interest

n farmland investing from both the retail and institutional sectors.

UK Farmland Investment

Firstly, we are seeing price volatility in more traditional asset classes such as stocks and bonds,

which is mainly because the world is still in a precarious economic position with very low levels of forwarding visibility.

Since economists cannot agree with each other and comfortably project where our global and national economies are headed,

it is very difficult to price and value assets such as companies and thus the stocks that make up these businesses.

Investing in Farmland – A Beginners Guide to the UK

Investing in Farmland - A Beginner
Investing in Farmland – A Beginner

Second, globally, and specifically in the UK,

the central bank has embarked on a policy of quantitative easing, i.e.

printing more money and pouring it into the main supply to revive the economy.

This will lead to higher levels of inflation up to a point and in an inflationary environment,

investors seek to protect their wealth by purchasing assets that are positively correlated with inflation,

i.e. their value rises when inflation rises,

providing growth for investors above the rate of inflation.

Third, investors have always kept some cash as part of their portfolios,

feeling that it is the safest asset that offers the lowest level of capital risk,

while at the same time providing a rate-relevant income return. of inter

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