Farmland and Agriculture - Immune to Drops in Commodity Prices?

Well, maybe not entirely, but it is our opinion that the agriculture sector sector is less sensitive to the ups and downs of commodities and the global economy than such other areas as metals and mining. This article on the investing website Seeking Alpha made much the same point. The article states:

"Agricultural commodities on the other hand face much less elastic demand. Less housing in construction in China hurts copper demand, but it does not change the fact that people will not stop eating. Emerging economies may be facing slowdowns, but they are not contracting or halting to the point that consumers will be forced to change back to a grain based diet from their newly acquired meat based diets."

This captures exactly why we favor agriculture as our favorite commodities sector. We prefer to play the sector by investing in farmland, as we believe that farmland as an investment brings a certain stability and peace of mind to a portfolio that agriculture stocks and futures may not achieve/ However, anyway you decide to play it, if you are investing in commodities do try to make sure that agriculture is is included.

Finally, we are very pleased to note here in this press release that the African farmland project Green World represents recently paid an initial yield of 16.2%!

Introduction to Farmland Investment

Whilst farmland investment may seem like an exotic asset class to some, there are ample reasons for investors to consider adding it to their portfolios. We are not talking about agricultural funds here, but rather about direct ownership of farmland. This blog is meant to introduce individual investors to the benefits of investing in farmland, as well as to over some options for doing so. To start with, we will list some reasons below:

1) Food prices are at record high, and farmland investing is a wonderful way to leverage this trend.

2) As a hard asset, farmland is also an excellent inflation hedge. With western central banks having already engaged in extensive Quantatative Easing (QE), and likely to engage in further QE as well, investors would be well-advised to consider adding inflation hedges to their portfolios.

3) Farmland generally pays high current income. With interest rates in the West near zero and likely to stay that way for the foreseeable future, prudent savers are being punished and are forced to look elsewhere for current income. Farmland is an excellent option.

4) Farmland is also an extremely stable asset, and adds diversification to a portfolio as it does not respond to the same factors as those which influence financial assets such as stocks and bonds. After all, land and crops do not care what the DOW or FTSE or DAX do on a daily basis!

This is just a brief overview, but we hope it serves as a basic introduction to the advantages of farmland investment. In future posts, we will go into more detail on all of these points, as well as consider whether it is possible for individual investors to invest directly into farmland.

Our firm, GreenWorld BVI, are a boutique alternative investment firm and farmland investments are by far our most popular. For UK individuals, all of these qualify as approved SIPP investments as well.

We are on the web at http://www.greenworldbvi.com and can be reached at info@greenworldbvi.com. Feel free to contact us with any questions!