The case for investing in Farmland is strong
Producers who are able to grow production will be rewarded:
- Global population is expected to increase by almost 60 million a year peaking in 2050, with almost all of that growth concentrated in the developing countries*
- The increase in the level of relative and absolute wealth in the developing countries is resulting in changing diets richer in protein and higher in calories; the required growth in production to meet this increase in demand is over 60% across the agriculture commodity spectrum
- The growth in production has been slowing as the gains from intensification are diminishing and as agriculture is forced to compete for scarce resources
High quality land is becoming a scarce resource:
- High quality land is under stress globally due to factors including over-intensification, pollution and climate change
Investment characteristics are potentially very attractive as an addition to broad-based portfolios:
- Historical data suggests low correlation to other asset classes and therefore farmland offers diversification of assets
- Farmland is an income generating asset
- Historical data suggest that as a real asset, Farmland may provide protection in periods of high inflation
Read more:The Economist: Investing in Agriculture
* Source: United Nations World Population Prospects, the 2010 revision
Please note the value of investments and any income from them will fluctuate and is not guaranteed (this may be partly due to exchange rate fluctuations). Investors may not get back the full amount invested. Past performance is not a guide to future performance.
Farmland is exposed to the impact of government policy. Subsidies, renewable fuels, trade agreements and attitudes to ownership rights can vary between markets, and may change over time. Farmland is an inherently illiquid asset subject to the range of risks associated with primary production: geographical, commodity based or management related. It is important to note that land values, like commodities, will experience large deviations from the equilibrium as a result of a range of market forces such as returns across other assets, level of interest rates, investor sentiment and other potential drivers.