Tuesday, December 4, 2012

Farmland as an Inflation Hedge

US total debt to GDP - the aim will be to inflate this debt away
In looking at the rationale for farmland as an investment, we have just came across a pretty scary chart below on the total debt to GDP in the United States.  The discussion always centers around government debt, but debt in all areas of the economy is off the charts.

How could this debt possibly be serviced?  The answer is, it cannot be, at least in any rational sense of the word.  We believe that governments will do what they have always done, which is to lower debt by printing additional money - probably through Quantitative Easing (QE) or some similar method - which will lower the real (as opposed to nominal value) of this debt. We would argue therefore that looking at farmland as a hedge against inflation makes a lot of sense.  

As a "hard asset", and investment in farm land in land will will not only provide investors this inflation hedge, but also offer a steady stream of good dividend income and offering excellent upside potential for capital gains due to the ongoing agricultural "super cycle" as coined by noted farmland and commodities investor Jim Rogers.

If you are interested to learn more about our unique, high dividend African farmland and European farmland investments, please contact us at info@greenworldbvi.com.

Additional Information on Global Farmland Funds by Institutional Investors

Retail investors can now invest in farmland just like AP2
Following-up on previous posts here and here, we have also come across yet more cases of pension funds investing in farmland.   The Second Swedish National Pension Fund (AP2) will invest $250 million in a joint venture with US pension fund TIAA-Cref.  AP2 has invested the money into a newly formed company that has joint venture partner, TIAA-CREF, as its majority shareholder and administrator.  TIAA-CREF already has extensive agriculture investments worth more than $2 billion, which include 400 farms globally.  From an article in the website Top 1000 Funds:
" TIAA's strategy for its' agricultural investments involves targeting growth crops that include corn, soybeans, sugar, apples, cranberries and wine grapes....The AP2/TIAA-CREF investment is to focus primarily on grain production.  Last year the fund made its first foray into forestry and farmland, buying assets in the United States and Australia.

In recent years, a number of pension funds have looked to real assets such as timber and farmland to provide an alternative investment that is not correlated to the markets.  These investments are also seen as a potentially attractive option in hedging inflation risk."
So, how can a retail investor invest in farmland?? The farmland investments that large pension funds make are obviously not available to individuals.  As a result of a number of innovations, it is now possible for retail investors to access the farmland asset class by owning farmland directly.

GreenWorld is proud to offer the following agricultural land investment:

Please contact us at info@greenworldbvi.com if you might be interested to discuss further.