Best Ways to Invest in Agriculture & Farming (Without Owning a Farm)
Farmland may not be the latest trending investment that piques everyone's interest at a dinner party. But as an investment asset class, it delivers impressive returns: 12.24% average returns per year for the past 20 years according to AcreTrader.
How? Well, stable and consistent returns are mainly due to population growth supplying a steadily growing demand. And improved processes and equipment contribute to favorable industry-wide economies of scale. Let's take a closer look at why agriculture can be an attractive investing category before listing a few of the best ways to invest in agriculture and farming outside of becoming a farmer.
Why Should You Consider Agricultural Investments?
According to Our World in Data, every year 140 million people are born worldwide and 58 million die. The difference — 82 million — represents the number of people added to the population each year.
All of those people will need to eat. So more farming — be it meat, vegetables or fruit — will be necessarily to fill that need. Practically speaking, investing in farmland means owning revenue-producing real estate that's crucial to delivering a product with a steady and growing demand.
There are several other reasons that a growing number of investors are adding farmland to their portfolios. These include:
- Less volatility than most other asset classes.
- Low correlation with fluctuations in the stock market.
- Farmland can act as an inflation hedge since the products benefit from rising consumer prices.
Best Ways to Invest in Agriculture & Farming
Short of donning your dungarees, jumping on a tractor and getting your hands in the dirt, there are several ways to add this asset class to your portfolio. And there's likely more options to come as a growing number of investors seek to diversify their holdings.
Publicly Traded REITS
There are several real estate investment trusts (REITs) that invest solely in agriculture and farming. Two of the largest are Farmland Partners and Gladstone Land Corporation.
Farmland Partners (FPI) is the largest publicly traded farmland REIT. It leases 186,600 acres of farmland to farmers who grow vegetables, nuts and fruit. It owns land in 19 states, valued at over $1.1 billion.
Gladstone Land Corporation (LAND) owns over 109,000 acres of farmland and 45,000 acre-feet of banked water, worth $1.4 billion.
Another option is Iroquois Valley Farmland, a public non-traded REIT. It focuses on owning and operating organic farmland in the U.S. Midwest.
Farming & Agricultural Stocks
You can also invest by buying stock in a wide range of publicly traded companies involved in various facets of farming.
- Some corporations own or lease farms, the larger companies being Adecoagro S.A. (AGRO) and Del Monte Products (FDP).
- Several large conglomerate companies, including Dow Chemicals (DOW) and DuPont (DP), develop seeds engineered to produce high crop yields.
- There are also companies that create billions of dollars in revenue by providing fertilizers to farms. These include Nutrien (NTR), Scotts Miracle-Gro Company (SMG) and Altius Minerals Corporation (ATUSF).
- Farming involves the need for heavy equipment. Companies in this space include Deere & Company (DE), CNH Industrial (CNHI) and AGCO Corporation (AGCO).
- And there are many companies that process the farmed crops into consumer products for our dinner tables. These include Archer Daniels Midland (ADM), Sysco Corporation (SYY) and Tyson Foods (TSN)
If you're looking to start investing in agriculture stocks, we recommend choosing a commission-free stock broker. You can compare our favorites here >>>
ETFs & Mutual Funds
Rather than buying individual stocks, you can buy shares of mutual funds and exchange traded funds (ETF) that invest in the farming sector.
With a low investment minimum, mutual funds and ETFs help you diversify into different aspects of the farming process without buying individual stocks.
- BlackRock Nutrition Fund (BGF) invests at least 70% of its total assets in stocks of companies that invest in agriculture-related services. Such services include seed development, farming, agricultural fertilizer and chemicals, and food production services including packaging, processing and distribution.
- Fidelity Agricultural Productivity Fund (FARMX), a mutual fund, holds 80% of its assets in securities of agricultural productivity companies. Top holdings include Deere & Co, Nutrien, Corteva Inc, Archer Daniels Midland, and CF Industries Holdings Inc.
- VanEck Vectors Agribusiness (MOO) is an ETF that holds shares of Deere & Co, Tyson Foods, Nutrien, and Archer Daniels Midland.
You can also invest directly in farming by purchasing commodities such as soybeans, corn, wheat, coffee and livestock. Commodities trade on the Mercantile Exchanges in New York and Chicago.
Active traders often invest directly in commodities though futures. Note that not all stock brokers support commodity trading, but some do including popular names such as TD Ameritrade and Interactive Brokers.
There are also commodity ETFs that invest in agricultural products such as grain, dairy and livestock. These ETFs are less speculative than buying commodities directly. And they reduce your risk while giving you exposure to the broad commodities market.
The Invesco DB Agriculture Fund (DBA) holds $1.9 billion in assets and tracks changes in the DBIQ Diversified Agriculture Index Excess Return.
There are several real estate crowdfunding platforms with varying minimum investment amounts. Most require investors to be accredited. Keep in mind that investment options close once funded, so available selections may be limited.
- AcreTrader hosts an online real estate investing platform that allows investors to buy shares in individual entities that own a farm. AcreTrader does all the investment management, and shareholders benefit from annual profit distributions. Minimum investment generally varies by farm but can start as low as $10,000. And advertised annual returns hover around 8% (but again, vary by farm). Its online portal makes it easy and convenient to do your due diligence and buy/sell shares of different farms.
- FarmFundr offers equity investments in farmland and agricultural facilities. Minimum investment is $10,000 and advertised annual returns are between 13% and 15%. (A portion comes from crop sales and the remainder when the property is sold.) Similar to AcreTrader, investors receive annual payments from their investments.
- FarmTogether focuses on farmland located in the U.S. Investors buy fractional shares invested in farmland. It earns quarterly cash rent payments plus a return on the long-term appreciation of the land when it's sold. It doesn't advertise its minimum investment amounts but advertised returns range from 6% to 13%.
- Harvest Returns provides both debt and equity funding options to invest in farmland, ranchland and timberland. Harvest Returns manages the deal from investment to exit. Ans investors receive an interest in an entity created specifically for the investment. Minimum investment is $5,000. Advertised returns vary by specific investment, from 8% to 40%.
Further reading: Debt or Equity Real Estate Crowdfunding: Which Is Right for You?
Farmland may not sound like the most thrilling investment at a glance. But it's worth your consideration given its for historical performance and stability.
If you want to delve in, you have choices to invest in agriculture without buying — or betting — a farm. There are REITS, stocks of agricultural companies, ETFs, mutual funds, crowdfunding platforms and commodities.
And as the industry heats up and more investment vehicles are introduced, there will be even more fun and savvy ways to bank on American farmland.
- 5 Alternatives to Investing in the Stock Market
- Ways to Take Advantage of the Commodities Supercycle
- How to Invest in Real Estate With Little Money