Investors in the United States are rapidly buying farmland, seeking to use agricultural properties as a hedge against inflation in their portfolios as food prices reach record highs.
Agricultural land value has risen by as much as 30 percent in the past year, as rampant price inflation drives many investors to seek out reliable, relatively stable assets such as farmland in order to hedge their fortunes against the entropic effect of inflation. This new wave of investment may also be attributable to rising demand for food, as food prices reach new highs, opening the door for higher production.
The most recent Consumer Price Index report from the U.S. Bureau of Labor Statistics indicates that food prices rose by 7.9 percent in the year ending in February 2022, but the pending figures for March may be more drastic on account of recent geopolitical events.
Farmland is seen as one of the safest, most reliable investments for large fund managers, with consistent annual returns and a strong likelihood of land price appreciation: The NCREIF Farmland Index reported total annual returns of 11.1 percent on cropland in 2021.
However, Gates is just one among many investors changing the agricultural industry at a rapid pace. In Iowa last year, the pool of buyers for the state’s agricultural land consisted of 35 percent investors and 65 percent farmers, in contrast to only 18 percent investors in 2019. The U.S. Department of Agriculture estimates that 70 percent of U.S. farmland is set to change hands in the next 20 years, as the baby boom retirement wave hits the industry, giving big openings for institutional investors to further entrench themselves in the agricultural industry.
However, the greatest impacts of growing institutional investment in farmland are not restricted to the hat and bonnet wearing religionists of Lancaster County: Throughout the country, the means of food production are being consolidated in the hands of relatively few investors at a rapid rate, disrupting a norm of farmland ownership by farmers which has persisted in America for generations.