Farmland is More Than Ever a “Generational” Asset

Author: Joe Bubon, President MWA

I started working with Murray and investing in high-quality farmland in 1990. At that time, there were only three or four other firms providing opportunities to invest in farmland to a small number of pension funds and individual investors.
Today, the number of firms offering those services has grown significantly. The number of interested pension funds and individual investors has exploded, creating demand for firms that can identify and manage opportunities in farmland.

Farmland, while still widely considered an alternative investment, has moved closer to the mainstream as it increases in popularity. More and more pension funds, family offices and individual investors are entering the market and buying farms each year.

The reasons for rising popularity of high-quality farmland are complex. They range from the inelasticity of demand for food, competitive annual cash returns and real long-term appreciation to the decreasing amount of global arable land relative to an increasing population.

Each fund, family office, investor and farming operation has its own reason for owning farmland. Ours is simple, and it is the culmination of all the other reasons: Farmland is a generational asset.

When I consider investing for the next generation, I cannot think of a better place to keep wealth than in high-quality farmland. It has always been our recommendation that any institution or family office make farmland an integral part of its portfolio. It’s not a surprise to us that so many have taken up this cause in the last 30 years. The only aspect that may be surprising to us is that it has taken this long for investors to figure out what farmers have known all along.

By “generational asset,” I mean that we are buying an asset we don’t plan to sell for 30-40 years or much longer. This type of asset is meant for the next generation, where it has tax benefits compared with other investments, provides annual income as well as real growth, and is an exceptionally stable investment.

Farmland has always been a generational asset for farmers. The farm gets passed down from one generation to the next, with each generation adding acreage. This method of growing farmland holdings has been extremely successful for farmers who have done so.

The benefits of long-term farm ownership that these farmers have seen translate directly to non-farmer owners. As this knowledge becomes more common, we are seeing more funds and family offices looking to buy high-quality farmland with every intention of holding it for a very long time.
Farmers are no longer the only ones who see farmland as a generational asset. Don’t look for this trend to reverse itself anytime soon.