Billionaires+highlight+solid+investment+in+farmland (2024)

FAQs

Why do rich people invest in farmland? ›

But farmland still provides real diversification benefits, and best of all, investors don't have to sacrifice long-term returns to lower the risk of their portfolio. Historically, farmland has actually outperformed stocks, bonds, gold, and real estate, generating 10.5% average annual returns since 1992.

A farmland conversion has the potential to produce the highest return since an investor would likely be able to purchase land for a lower price and, therefore, could earn a higher cash yield and potentially benefit from higher land value appreciation.

Is farmland a good investment? Farmland investments are often compared to other types of real estate investments, such as residential or commercial properties, and the answer is a resounding yes.

Some of the world's biggest billionaires are landowners, such as media mogul Ted Turner who owns 2 million acres, Amazon.com's AMZN, -0.66% CEO Jeff Bezos who has amassed 420,000 acres and Microsoft MSFT, +0.47% co-founder Bill Gates's 270,000 acres, he notes.

In addition to offering diversification and sustainability benefits, owning agricultural land also provides investors with a tangible asset. According to the American Farm Bureau Federation, the average value of farmland in 2020 was estimated at $3,160 per acre — an increase of 4% since 2019.

This is because investors can make money two ways: from the annual cash rent that farmers pay to use the land and also from steady increases in land values. For example, consider a standard piece of farmland in the Midwest or the South.

Farmland provides food and cover for wildlife, helps control flooding, protects wetlands and watersheds and maintains air quality. In addition, new energy crops grown on farmland have the potential to replace fossil fuels.

The land is always a profitable investment as you can make money off it quickly. You can either sell your land, use it to grow crops, use the land as boat storage, or lease it out. The highest and best use of land is an imperative factor that determines the value of your land.

Livestock is probably the most common way farmers make money from their land. And while animals have a few more expenses and a higher overhead, they usually bring in top dollar in terms of net income.

Now, one can consider farmland simply as an alternative investment. Farmland produces returns both with rent yields and appreciation in the farmland's value. So these investments can work somewhat like dividend stocks, with gains from income and capital gains.

Why are investors buying farmland? ›

Buying farmland, waiting for the value to appreciate, and then selling it is the most basic form of farmland investing. It's simple: land values rise, and the land produces crops, which provides you with income. The higher the income, the more valuable the farmland.

Investing in farmland as an inflation hedge. There's one more big reason that farmland is an especially compelling investment right now: inflation. Unlike mainstream financial assets, which tend to lose value when consumer prices go up, the value of farmland actually tends to rise when prices rise.

The 2022 Land Report 100, compiled each year by The Land Report magazine, released its annual list of landowners who own the most acres in the United States. The nation's largest private landowners are the Emmerson family in California who own over 2.4 million acres.

Warren Buffett owns more than 242,000 acres of farmland in the United States, including a 1,500-acre family farm in Illinois. He also has three research farms in South Africa and Arizona. Buffett has shown interest in farmland for most of his life.

The largest agricultural landowner is the Chinese dairy farm 'Mudanjiang City Mega Farm', which is owned by Russian and Chinese owners. More than 9 million hectares belong to the company.

Investing in farmland can also be a great passive income source. With farmland, investors can benefit from rental payments from operating partners, income generated by crop sales, and land price appreciation at the end of the hold period.

Financial Reasons Owners Sell Farmland

Sometimes a seller just wants to realize their gains in asset appreciation or trade land for cash to invest in another opportunity. For example, a landowner may find a desirable property and want to sell out of one piece of land to invest in the new one.

That's because we also need farmland to restore our planet. When properly managed, farmland and ranchland support wildlife and biodiversity, recharge aquifers, clean water, and—of paramount importance in our fight against climate change—sequester carbon.

Question: Why does the government pay farmers not to grow crops? Robert Frank: Paying farmers not to grow crops was a substitute for agricultural price support programs designed to ensure that farmers could always sell their crops for enough to support themselves.

Our Farmland is Disappearing

The Earth has lost one-third of our arable farmland over the last 40 years alone due to erosion, pollution, overworking and global warming.

Why are farmers struggling financially? ›

Farmers are struggling to keep pace with inflation. Production costs for seed, fertilizer, equipment and other farming essentials are the highest we've seen in decades, subjecting farmers to higher cost of capital required to operate their business.

Low-density residential (LDR) land use includes scattered subdivisions and large-lot housing, which fragments the agricultural land base and limits production. The Plains states are losing some of the most prime farmland in America, according to AFT. Kristopher Reynolds is the Midwest regional director with AFT.

Agriculture impacts society in many ways, including: supporting livelihoods through food, habitat, and jobs; providing raw materials for food and other products; and building strong economies through trade.

In general, you'll likely find it cheaper overall to buy an existing home, but that also depends on the market. A home loan is less risky than a land loan, and typically comes with a lower down payment and better interest rate.

For small investors to truly enjoy the more traditional sense of land ownership, perhaps the best options are timber farms, mineral development lands, vegetable gardens, orchards, vineyards, and recreational land.

Land values increase when demand for land exceeds the supply of available land or if a particular piece of land has intrinsic value greater than neighboring areas (e.g., oil can be found on the land).

1. California

It is recognized as the agricultural powerhouse of the United States. California's crops account for around 73% of the state's agricultural revenue, with livestock commodities accounting for the remaining 27%, allowing it to surpass all other states in terms of farm income.

Typical values include honesty, humanity, success, progress, freedom, democracy.

Where is the best farmland in the US? ›

The best states for farmland include Montana, Kansas, Oklahoma, South Dakota, North Dakota, Texas, Iowa, Kentucky, Wyoming, and California. Consider factors like profitability, cost of operation, infrastructure, and availability when selecting a location.

A land values map released by the U.S. Department of Agriculture's National Agricultural Statistics Service in August 2022 shows national average farm real estate values per acre steadily rising since 2009, to $3,800 per acre in mid-2022.

Over the last 20 years, United States farmland has offered average returns of 12.24%. At this rate, $10,000 invested in farmland in 2000 would now be worth over $96,149. Farmland returns are made up of two values, land appreciation, and capitalization rates of the property.

#1: Farmlands are Very Recession Resistant

While it seems like farmlands are a prime source of instability due to their sensitivity to climate change, the opposite is true. Farmlands are actually quite resistant to recession.

While owning farmland can be a very profitable venture over the long-term, farmland will typically never cash flow when purchased with substantial borrowed capital.

Land prices also tend to drop during a recession period, but they almost always rise immediately after the downturn is over, which is why it might be a good time to consider buying land to build a home for the future or for investment purposes.

The rising cost of goods and services can make it difficult for farmers to make a profit and can lead to food inflation, which can be detrimental to both farmers and consumers. It is an important topic to understand as it can have a significant impact on the food prices and food security for a country.

The value of money affects the farmers ability to pay off the loans. If the inflation lowers the value of money it makes it easier for the farmer to pay off the loans.

Who is the biggest farmer in the US? ›

One of the largest landowners in the US is real estate tycoon Stan Kroenke, who owns nearly 1.7 million acres of land scattered over seven states. Ranches, forestry, hunting preserves, and several significant developments are among Kroenke's holdings.

Currently, investors are attracted to farmland due to its low correlation with the stock market's volatility. This makes it an exceptional tool for diversifying portfolios. Farmers have pricing power for their crops. Food is not a discretionary item on any budget.

What Are the Risks of Farmland Investing? Like all investments, farmland investments come with risk. Some that are most relevant to farmland include operational risk, commodity price and land value risk, and limited liquidity.

Some of the world's biggest billionaires are landowners, such as media mogul Ted Turner who owns 2 million acres, Amazon.com's AMZN, -0.66% CEO Jeff Bezos who has amassed 420,000 acres and Microsoft MSFT, +0.47% co-founder Bill Gates's 270,000 acres, he notes.

Most Richest Farmers in the World

Qin Yinglin is a Chinese businessman who founded the Muyuan Foodstuff Company, which is one of China's largest pig breeding and pork processing firms. As of 2021, Qin's net worth is estimated at over $20 billion, making him one of the wealthiest farmers in the world.

Farmland offers both short-term and long-term opportunities for creating wealth. The land parcel itself is a hard asset typically maintains its value in your investment portfolio. Its low-risk nature can help diversity your holdings and balance out some of your riskier stock market investments.

One thing both Warren Buffett and Bill Gates have in common is that they both love farmland as an investment. Buffett purchased his first farm before high school in his home state of Nebraska for approximately $10,000. Gates owns over 242,000 tillable acres.

The land is always a profitable investment as you can make money off it quickly. You can either sell your land, use it to grow crops, use the land as boat storage, or lease it out. The highest and best use of land is an imperative factor that determines the value of your land.

Does Bill Gates receive farm subsidies? ›

While many agricultural support programs are meant to “save the family farm,” the largest beneficiaries of agricultural subsidies are the richest landowners with the largest farms who, like Bill Gates and Warren Buffet, are scarcely in any need of taxpayer handouts.

Farmland can serve as a cornerstone of a balanced investment portfolio. Commodity prices, including the cost of food, tend to rise with inflation. This strong correlation allows agricultural investing to protect against inflation, especially compared to high-volatility assets.

Among the big players are TIAA-Cref, BlackDirt, Hanco*ck Agricultural Investment Group, American Farmland Company, AgIS Capital, and Gladstone Land Corporation.

Is buying land a good investment? In most cases, the answer is yes – as long as you're properly prepared. Investing in undeveloped land, however, isn't quite as simple as putting money down on a duplex. To ensure you're making an informed decision, we've outlined our top seven tips to know before purchasing land.