Comprising tree, vine, and shrub crops with productive life spans often spanning decades between replantings, permanent crops are one of the major categories of farmland investments in focus for FarmTogether and many other investors looking to diversify with farmland. There is a huge range of options out there and each one carries its own unique return potential and risk profile, and understanding the nature of each crop and its management requirements is critical to making good investment decisions.
Beyond producing grapes, vineyards themselves - in Europe, the US, South America, and Australia - are often high-end tourist destinations. That said, while winemaking represents the most lucrative use of grapes, it is far from the only one, as grapes have been eaten fresh as well as consumed in dried and preserved forms and as juices for thousands of years. The main wild ancestor of most grape varieties, Vitis sylvestris , is native to central Asia and now has more than 10, varietals descended from it.
Grape cultivation dates back to about 8, B. Ultimately, it was Spanish settlers of missions in the American Southwest that brought grapes to the new world in the 18th century, and their production took hold in the particularly suitable climates of Northern California and slowly expanded from there.
Today, California is still the runaway leader in grape production among all US states , but other notable producers include Oregon, Washington, and New York. Yet, there is evidence to suggest that, thanks to climate change, the grape-growing landscape in the US and around the world could be due for serious disruption, especially in the case of the particularly climate-sensitive grape varieties used for winemaking. Scientists estimate that if mean global temperatures rise by 2 degrees Celsius, the total area of global farmland suitable for wine grape production could drop by up to 56 percent.
The inevitable reallocation of production that follows will be uneven, with already-warm regions such as Napa Valley at the greatest risk of losses, and cooler and wetter regions such as New York or the Pacific Northwest potentially in a position to benefit as they become more suitable for varieties displaced in other regions. Better still, some of the overall loss of suitable areas for wine grape production could be mitigated if growers are prepared to experiment with the incredible genetic diversity of wine grapes by breeding and planting more resilient varieties.
There are many shrub-like plants used for growing ingredients in human food, but the ones of greatest commercial significance in the US that can be neatly described as permanent crops all fall into the general category we know as berries. Specifically, there are two families of berry plants that deserve the most attention: Rubus crops, which include raspberries and blackberries, and Vaccinium crops, such as cranberries and blueberries.
Rubus plants can also be referred to as brambles and are actually a member of the rose family, Rosaceae , as evidenced by their thorny stems and compound leaves. Their ecological origins are mixed - ancestors of different varieties have been traced to different parts of Asia, Europe and North America - and their commercial production today reflects this broad reach.
Raspberries and Blackberries are grown on each of those continents, and are consumed fresh as well as in processed forms such as juices or jams. Though grown nearly nationwide, the leading producers of Rubus fruits among US states are Oregon, California and Washington. Vaccinium berries, meanwhile, are native to more northern latitudes in Asia and North America and are distinct from Rubus berries in a number of key ways.
The ecological requirements for this type of production are fairly specific, especially when it comes to the types of soil required, and have prevented the spread of commercial cranberry farming throughout the rest of the country - but, impressively, some cranberry bogs in the Northeast are more than years old and still bearing fruit. Blueberries are similar in that they grow in extremely dense stands, but tend to be found on open meadows or in woodlands in a larger variety of northern temperate climates.
Rather than spreading from seeds, new blueberry growth actually stems from underground runners called rhizomes. This style of production occurs on a large scale in at least 14 US states as well as a number of other countries in Europe and Asia, with the US ranking as the largest producing nation.
Unlike cranberries, though, a substantial and increasing share of commercially-grown blueberries in the US are specific varieties that can be planted in Rubus- style hedgerows and managed and harvested more similarly to other permanent crops. One of the fastest growing categories of permanent crops, tree nuts have exploded in popularity among commercial farmers in the US and globally over the last several decades due to their high yields and high cash value per crop.
Their value has increased greatly as markets, both in the US and abroad, have seen much greater demand for healthy snack foods and non-meat, non-dairy sources of protein. Though of different ecological origins, these crops have a number of key characteristics in common. Each one requires long, hot summers followed by cool winters in order to bloom, and are wind-pollinated having separate male and female flowers, meaning that growers have to maintain orchards with the right mix of male and female trees throughout in order to achieve an even fruit-set.
In desperate situations, growers who foresee this problem can get around it by releasing large numbers of bees into their orchards or even by spraying their orchards with pollen obtained from elsewhere. Still, for all that they have in common, each tree nut crop has a distinct backstory. Outside of California, another significantly popular tree nut crop is the Hazelnut , which until fairly recently had not even had a significant commercial presence in the US. Each of these trees, as with most tree crops, must go through an early premature period of little to no yield before the tree reaches a productive size, which can often take 5 to 10 years; that said, beyond that initial period, these trees can remain productive for decades after that with the right pruning and management.
For example, though the English Walnut is the primary variety harvested in the US, it is often grafted onto Northern California Black Walnut rootstock, which is more tolerant to cold winter temperatures. At this point, readers with knowledge of tree nut production in the American West, especially here in California, might be wondering why this section has made no mention of almonds, which are grown perhaps more widely than any of the other nuts mentioned above.
In the US, the name stone fruit usually is used to describe fruits descended from the Prunus genus. Prunus fruits are native to Europe and central to western Asia, but were brought to the new world during the last three to four centuries. The US produces a huge diversity of Prunus fruits across a number of regions: Cherries in the Midwest and the Pacific Northwest, peaches and nectarines in the South; meanwhile, nearly all types of Prunus fruits are grown in California.
Alternatives Investing in farmland. Receive future insights. How does direct investment in global farmland provide diversification, inflation protection, and return potential? As water becomes an increasingly scarce resource, agricultural regions with sustainable water supply will become implied exporters of water by virtue of their crop production. For these reasons, direct investment into global agricultural land presents an increasingly compelling investment opportunity, as it offers potentially stable returns on investment, low correlation to other assets and a hedge to inflation.
Investing in globally diversified farmland Supply and demand fundamentals are positive Investing in agricultural land is a fundamental way to benefit from the growing worldwide demand for food. The case for investing in this asset class is not only strong now, but becoming stronger, due to several positive fundamental factors. By , agricultural producers will have to support a population of more than 9.
The Global Harvest Initiative GAP report estimates that to meet global demand by , agricultural producers would have to double their output from levels. This will require an annual average growth of at least 1. Although this growth rate does not seem significantly lower than the required 1.
This potential short-fall is driven primarily by increasing constraints in developing countries such as China and Brazil. In the face of continuing population growth and limited land base, farms globally must continue to do more with the same resources. As a result, there is likely to be continued pressure on prices for food-producing land. Developing countries continue to increase protein consumption The developing world has a growing middle class that will, as it becomes increasingly prosperous, consume greater quantities of protein.
Producing a single pound of beef protein requires approximately ten pounds of feed grain, thus a shift toward greater global protein consumption will increase demand for grain dramatically. Row crops These crops are planted and harvested annually and include grains and oilseeds such as corn, soybeans and wheat. Typically, row crop investments produce relatively stable income returns over time since planting decisions can be made annually.
A number of row crops, such as corn, soybeans and sugarcane, are also used in the production of alternative fuels. Given their lower risk profile compared to permanent crops, row crops often serve as the core of a diversified portfolio. Permanent crops Permanent crops, such as wine grapes, tree nuts, citrus, apples and avocados , have a long lifespan, typically 25 years or more.
They mature three to seven years after planting, so there is usually a lag between investment and realization of returns. These crops historically have delivered higher average income returns than row crops, but they also have experienced higher volatility on a year-to-year basis. Value-added investments These are investments in related companies and technologies that aid in the production and distribution of food.
They might include fruit packing facilities, grain storage facilities, water treatment companies and other allied businesses. Generally, only portfolio managers with sufficient scale and strong relationships within the sector consider these types of transactions, which allows them to participate in opportunities that are related to agriculture, but further up the value chain.
The tenant pays the lease up front and keeps any profit above the lease amount. In a cash flex structure, the tenant pays lower cash rent, but gives up a portion of the upside of crop production based on commodity pricing during the crop year. In both structures, the tenant is expected to maintain the quality of the property during the lease term.
Share lease: In a share lease, the investor and tenant each provide a share of the inputs to produce the crops. Custom farming: In this structure, the investor selects an operator who will farm the land and provide the necessary inputs, manpower and machinery. The investor takes all the risk and reward of crop production while making minimal direct capital investments in farmland equipment and personnel.
Direct farming: Here, the investor operates the property directly, providing the machinery, personnel and crop inputs needed. This structure offers the best return potential to the investor, but also the highest degree of risk. Related articles. Harry Tan and Leo Chung discuss the appeal of Japan as a key investment destination and the attractiveness of the senior living sector in particular.
Harry Tan, Leo Chung. Preparing for the end of LIBOR is a priority for Nuveen, and our expertise in active management positions us well to manage the complexities. We set out our work on ESG in and discuss the topics we expect to be defined by in in our ESG clean energy report. Contact us. Our offices. Risks and other important considerations Certain products and services may not be available to all entities or persons.
This document does not purport to be a comprehensive statement or description of any markets or securities referred to within. Prospective investors should not rely on the information in this document and should make their own enquiries and evaluations they consider to be appropriate to determine the suitability of any investment including regarding their investment objectives, financial situation and particular needs and should seek all necessary financial, legal, tax and investment advice.
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Farmland Investment Research This section includes an assortment of agricultural real estate-related research that we consider relevant for landowners. Ausubel,Iddo K. Wernick,Paul E. Chris Erickson, Mg. Department of Agriculture Mike Baroni, V. David Fischhoff, V. Bruce Jones, Univ.
Farm management software: Flexible cash lease calculator, crop share calculator, custom farming rate calculator, machinery rental rate calculator Ohio State Univ. Cropland Used For Crops—Cropland harvested, failure, and summer fallow for the 48 states, annual, The annual cropland portion of the series has been consistently maintained since Cost Studies - The UC Davis Department of Agricultural and Resource Economics provides access to all of their published cost-and-return studies on a wide range of crops, including olive studies going back to Louise Ferguson, offers resources on many crops, including olives.
Go to fruitsandnuts. Olive Production Manual - The key reference work on olive orchard management, distilling decades of research knowledge, primarily through work in the table olive sector. Louise Ferguson has led a multi-year research effort to develop mechanical harvesting of medium-density orchards for table olives.
She has an online chronicle documenting the project, including proposals, reports, and photos. To find a farm advisor in a specific county, click on the county you want, then click on the "contact us" link on the left side of the screen. Farmland Investor Letter The premiere, independent, financial advisory letter focusing exclusively on valuation trends important to landowners and investors.
Subscribe Get your free sample issue. While there have always been, and will continue to be, investors willing to make transnational land purchases, a new category of player is appearing on the field of play: sovereign states seeking to secure food supplies for their countries. Although it is difficult to determine whether investors in the private sector - both individuals and companies - are currently really any more active cross-border than they have been they have always been active , their agricultural land transactions certainly appear to be receiving more exposure in the press than they have before.
Some examples of such corporate cross-border transactions purchases or leases - in some countries, e. Maitland says the reverse is also true, with U. And while Landkom's recent investment the lease of some , hectares [, acres] of farmland may have helped put Ukraine in the agricultural spotlight, according to the Financial Times , we may soon also see both Russia and Kazakhstan making " a mark on world agriculture and food markets in coming years.
The price of agricultural land in the U. Combine these, however, with a weak dollar and strong export markets, and agricultural land in the U. From having been " an asset class for ultra-pessimists only ," it is now "hot" property.
While U. And this is only what has been reported! The Hancock Agricultural Investment Group , part of Canadian Manulife Financial Corp, and one of the largest institutional managers of agricultural real estate in the U. The group oversees some , acres of farmland in the U.
Looking beyond just returns currently extremely attractive , and a potential continuing hedge against inflation, an investment in farmland can provide two further significant benefits. First, it can provide returns with less volatility than those from other classes of asset.
Second, because there is low and negative correlation between farmland yields and those from stock and bonds, such an investment can provide the important benefit of diversification. In addition, correlation even with conventional real estate is very low. As with timberland , while direct ownership and management i.
One of the most significant of these is the issue of diversification in the farmland itself - especially with a single investment. A well-diversified holding of farmland row crop, permanent crop, pasture and even timber will, therefore, not only require a significant investment, but may also involve land holdings in a number of different locations.
For institutions and "instividuals" i. If you already own land, then a number of U. Bank USB will, for a fee, manage your farm for you. For those interested in Canada, and suitably qualified, an investment in farmland in, for example, Saskatchewan, can be made through the likes of the Agriculture Development Corporation or through Agcapita GP Corp. Except for access via a private equity, or other, fund, the only other option is to invest in land indirectly.
This is, however, a very loose proxy, with, as any such investment being, primarily, an investment in what the land produces, as opposed to being an investment in the land itself. Amongst these are:. The market in agricultural land in the U. With the inexorable rise in the price of domestic agricultural land, investors are starting to look seriously ex-U. Investors in countries experiencing similar land market conditions, and those countries concerned about securing sources of food for their growing populations, are also looking at acquiring land internationally.
What we are seeing now is just the start of such a search and the start of such investment.
Farmland LP focuses on buying commodity farmland and converting it into more valuable organic farmland. It offers accredited investors the opportunity to participate in a private equity fund that has the flexibility of eventually becoming a REIT and going public. Harvest Returns is a crowdfunding platform offering a variety of agricultural deals that are mainly open to accredited investors. Steward is a crowdfunding platform focused on investing in sustainable farms.
It aims to provide farmers with capital in the form of loans to sustain and expand their farms. Farmland has historically been a good investment. Unfortunately, not many investors have been able to benefit from this asset class, given the high upfront costs of buying farmland. However, that has changed in recent years as new opportunities have emerged in the form of REITs and crowdfunding sites focused on farming. Because of that, investors can now own a slice of American farmland for a much smaller upfront cost, which is making it an increasingly accessible asset class.
Why do we invest this way? Learn More. Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of Discounted offers are only available to new members. Calculated by Time-Weighted Return since Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Premium Services. Stock Advisor. View Our Services. Our Purpose:. Latest Stock Picks. Source: Getty Images. Why invest in farmland? Those returns come in two forms: Increases in farmland values. Crop yields or cash rental payments. Low volatility Farmland returns have historically had less volatility than most other asset classes, including the year U.
Low correlation Farmland returns typically don't move in the same direction as the stock market. Inflationary hedge Farmland is a real asset that produces commodities like corn and grain. How can I invest in farmland? Buy land directly The most obvious way to invest in farmland is to directly purchase usable cropland or pastureland and rent it out to a farmer or rancher.
Investors that buy land as a means to invest in farming have several options, each of which has its share of pros and cons: Purchasing an existing farm via a sale-leaseback transaction, where the current farmer continues to work the farm and pay rent to the new owner. A sale-leaseback transaction would likely be the least risky and most passive way of directly investing in farmland. However, in exchange, an investor might need to pay a higher price for the land and therefore earn a lower cash yield.
Buying an existing farm or agricultural land and leasing it to a new tenant. This option could potentially generate a higher return for an investor. However, it would likely require more work upfront to find the right tenant for the farm. Acquiring land that's not currently used for agriculture and converting it to cropland, pastureland, or an urban farm.
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. However, this option requires the most work since an investor would need to transform the land to farm use and find the right crops and tenants for the location.
Invest through a crowdfunding platform focused on farming Several companies have formed in recent years to provide access to farmland investments using the internet. AcreTrader AcreTrader is a crowdfunding platform that provides accredited investors with direct access to farmland. FarmFundr FarmFundr is a crowdfunding platform that allows accredited investors to invest in a variety of opportunities like farmland and agricultural facilities. FarmTogether FarmTogether is an online marketplace for farmland investing.
Farmland LP Farmland LP focuses on buying commodity farmland and converting it into more valuable organic farmland. Harvest Returns Harvest Returns is a crowdfunding platform offering a variety of agricultural deals that are mainly open to accredited investors. Steward Steward is a crowdfunding platform focused on investing in sustainable farms. Related Real Estate Topics.
In Lebanon, smallholders who struggled to make a living from farming sometimes turned to illicit crops, which the government would then eradicate — for some, switching to wine production offered hope of a new start. For many farmers and workers, involvement in Fairtrade has helped to improve their situations, whether through the targeted investment of Fairtrade revenues toward education and improved facilities, or the encouragement to form cooperatives that gain economies of scale in this global industry.
Vineyards that are Fairtrade certified receive at least the Fairtrade Minimum Price when they sell their wine grapes to a trader on Fairtrade terms. This protects against sudden price shifts and enables producers to plan beyond the next planting and harvesting cycle.
The Fairtrade Minimum Price for wine grapes varies depending on the cost of living and business in each origin area and on its cultivation method it is higher for organic than for conventional cultivation. The Fairtrade Premium — extra funds paid on top of the sales price — enables small-scale farmers and vineyard workers to invest in social, economic and environmental improvements. Fairtrade has rigid health and safety standards to protect producers' well-being as well as that of nearby communities and ecosystems.
For instance, Fairtrade bans the use of some highly toxic agro-chemicals that are often sprayed in vineyards and prescribes rules for the safe application of less toxic ones. We drink wine for enjoyment — for its wonderful flavours and aromas, that warm glow… When you buy Fairtrade wine, you help to ensure that workers and small-scale growers behind those wines can get a fair deal — we can all toast to that!
Fairtrade products are widely available. The blue countries and territories on the map below have Fairtrade organizations that promote Fairtrade products. Their websites often include a product finder to show you the full variety of Fairtrade products near you. Even if there isn't a Fairtrade organization where you live, Fairtrade products may still be available — look for our familiar marks on products!
Investors groups hold 31% of America's farmland, with 21% owned by non-operating crops (almonds, avocados, wine grapes, non-tree fruit, and vegetables). Examples include apples, tree nuts, citrus, avocados and wine grapes — sold whole or used as ingredients for other products. Westchester and a local crop. Investing in agricultural land is a fundamental way to benefit from the growing worldwide Permanent crops, such as wine grapes, tree nuts, citrus.