Farming almonds in California
Some farmers’ organisations see the land grab by investment funds as a threat to rural communities © Melina Mara/The Washington Post via Getty Images

Investors are pouring record amounts of money into US farmland as they snap up an asset expected to outperform as the world’s population grows sharply while natural resources become scarcer.

The value of farmland held by investment groups has more than doubled over the past three years, according to the National Council of Real Estate Investment Fiduciaries (NCREIF).

Its value hit $16.6bn at the end of 2023, up from $7.4bn at the end of 2020 and $1.8bn in 2008, said the NCREIF, which tracks the holdings of some of the largest agricultural investment funds in the US.

The average value of US cropland has also swelled in recent decades, rising to $5,460 per acre last year from $1,270 per acre in 1997.

These values are expected to continue surging as climate change makes arable land increasingly scarce as the global population rises.

With the number of people on the planet set to rise 20 per cent to about 10bn by 2050 from about 8bn today, the world will need to produce 60 per cent more food, according to UN estimates. 

Line chart of Total farmland market value ($bn) showing The value of US farmland held by investment firms has more than doubled since 2020

The jump in value of US land has been driven by the Covid-19 pandemic, which upended global supply chains during 2020, leaving supermarket shelves bare.

Then, in February 2022 Russia’s full-scale invasion of Ukraine, one of the world’s biggest exporters of grain to global markets, sent food commodity prices soaring.

“Married with rising inflation”, this made agricultural land more appealing to investors, said Cedric Garnier-Landurie, head of agriculture at Cordiant Capital, a specialist global infrastructure investor.

“If there’s one asset class that hasn’t lost money in the medium to long term, it has been farmland.”

But even with inflation easing, investors are not losing their taste for agricultural holdings, say fund managers. 

“The secular trends are extremely attractive,” said Antoine Bisson-McLernon, chief executive of Fiera Comox, a subsidiary focused on private assets for global assessment management company Fiera Capital, which has about $2bn in agricultural assets under management.

“If you have a long-term view of the world, owning quality land, with access to water is a good place to be,” added Bisson-McLernon, who before joining Fiera Comox launched the agricultural investment strategy of Public Sector Pension Investment Board (PSP), one of Canada’s largest pension investment managers.

A corn harvest in Illinois
‘Arable land for farming is not something we can make more of’ © E. Jason Wambsgans/Chicago Tribune/Tribune News Service/ Getty Images

Fiera Comox and Cordiant Capital focus on permanent crops such as apples, cherries and almonds, although most institutional investments in the US have been in row crops, such as wheat, corn, soyabean and other globally traded produce.

After the 2008 financial crisis, large investment groups such as PGIM, PSP and TIAA started to buy up more US agricultural land as they sought to diversify and protect their portfolios against downturns in equity markets through what is seen as an uncorrelated asset class.

Their strategy was put to the test again in 2022 as inflation soared and stocks and bonds saw double-digit percentage falls. 

“Even some of the private assets that are known to be good diversifiers, such as real estate, were hit during [2022], whereas farmland actually performed quite well,” said Bisson-McLernon, adding that “2022 really opened the eyes of many investors [to farmland]”.

The last couple of years have increased investor understanding of the growing demand for food as well as the constraints on the supply side, said Jamie Shen, managing director and head of agriculture at PGIM Real Estate, which today manages more than $10bn across agricultural debt and equity strategies on behalf of institutional investors.

Investors “can get their head around this idea that we have a growing population, that we need more food and that arable land for farming is not something we can make more of”, she said, adding that PGIM “is continuing to see investor demand because of those things”.

Still, only between 1 per cent and 3 per cent of the $3.4tn market is owned by investment funds, according to industry estimates. Family-owned and operated businesses account for 95 per cent of all US farms, according to the most recent data from the US Department of Agriculture. 

Line chart of Average value of US cropland per acre ($) showing The price of US cropland has soared

Some farmers’ organisations nonetheless see the land grab by investment funds as a threat to rural communities.

The average age of an American farmer is 58, according to the USDA. This means that about 400mn acres of farmland is set to change hands in the next decade or so, said Jordan Treakle from the National Family Farm Coalition.

“There’s significant concern that these companies are going to be in control of the agricultural land base in this country,” he said.

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