By Dinu Ajikutira
Is farmland a good investment?
If you are like most of my urban friends, you know very little about farmland, and there has never been a need to know more. And if you do know a thing or two about farming in the US, you are probably thinking, “That’s not a fair question” because you know every farmland is different, and its value is based on a broad set of factors, just like your home.
So really there are two questions here:
- Should you care about agricultural land? And if you do,
- How do you learn about land you haven’t walked?
There are many kinds of people who already care about farmland from an investment, productivity and opportunity standpoint. You already care if you are an investor in farmland or have a stake in a fund that invests in farmland. You already care if you are a grower looking for new land to buy or rent. You already care if you are an agricultural service provider, like an equipment dealer, inputs sales rep, storage or transport provider. You already care if you’re an Ag land realtor, Ag lender, the list goes on and on. The truth seems to be that most of us, to one degree or another, are invested in farmland. Blind investing or engagement with partial knowledge is not ideal, so many of us want to know more about the land in which we’re interested and already invested. Some of us may be wondering if there’s value in diversifying our portfolio to include farmland, or when to expand existing investments, or when to pull back. The answers to these questions depend on your individual strategy as well as on the insights and intelligence you can get about the land. Decision-ready intelligence about the farms, fields, counties, crops and regions you might be considering is an important tool for anyone interested in land.
So the question remains: How do you learn about land you haven’t walked?
Last year (those pre-Covid19 times!), I was at an Ag related conference, where I ran into a couple of investors who were there looking for better investment options for their companies. They explained that over a long term, farmland returns had outperformed most other investment classes like gold, the S&P index, commercial real estate, etc. They also mentioned it was far less volatile. Apparently, investing in farmland was a very interesting diversification strategy option for them.
A recent article in Agriculture.com titled “Farmland Values Constrained by Falling Income, Pandemic” by Chuck Abbott, points to lower growth in the short term. This sentiment is more clearly reflected in Farmer Nationals’ June newsletter “What’s Next for the Land Market?”, and goes on to say “investing in ag land will be a safe haven” and “a long term hedge…”. Obviously, no one can predict what will happen, but the message is clear; land values and farm profits could go lower in the near term and likely grow over the next decade. For me, this signals the ideal time to grow an Ag portfolio or buy / lease / manage / operate farmland for the long term.
The elephant in the room is that you wouldn’t find independent and objective information about fields and parcels and regions of farmland. It may be a good time to invest, but the question remains: Where to invest? Which fields, farms and locations are best? While buying cars, you can compare reviews, images, current and past models of the car. In the case of used cars, a Carfax report detailing its history is available. But when it comes to farmland, you are pretty much on your own! There’s no objective Landfacts report. Investors, operators, owners and servicers are left on their own hunting down county records, trying to infer specific performance and productivity stats from national USDA numbers and trying to track down owner information. This hurts everybody, especially the farmers who seek to operate new land and the owners whose equity and retirement depends on the land’s value.
We’ve answered the challenge and have created the decision-ready land facts reporting platform that was missing. The CIBO Insights Platform was created to present objective and science-based information about any farmland in the US that you want to know more about. CIBO combines a science-based perspective on the management and production history of the land, near term potential, productivity, stability, value, environmental impact, predicted in-season yields and ownership information. CIBO also shows how pressure on income may be affected due to changes to the land due to climate change. A free registration is all that’s required to get started!
By making information about farmland transparent and easily accessible, we help farmers, owners and all other stakeholders scale their business and improve their bottom line. Take a look at the App and send me a note using the “Send Feedback” button or here on LinkedIn with your feedback. I’m eager to connect with you and learn how we can help you get more from our science and data platform.
About Dinu Ajikutira
Dinu Ajikutira is passionate about leading software companies from concept to rapid market success. He has led development, product management, product marketing, and customer success organizations for B2B and B2C businesses, ranging from startups to companies with $450M annual revenue and double-digit growth. His cross-functional experience and strong customer focus help him create products that resonate with target customers and generate exceptional growth.
As a Vice President of Product Management at CIBO, a science-driven software startup, he has helped bring market needs, business planning, and product strategy together to create software applications at scale. He is a software products expert with an end-to-end, hands-on, and leadership experience and has previously worked for Aspen Technology, Aurel Systems, and Hyprotech Company. He has a Masters degree in Software Systems from the University of British Columbia and a Bachelors in Engineering.