Investing in Agriculture (For the Rest of Us)
If you’re like me, you’re not going to inherit a farm.
You also are probably not sitting on a pile of capital large enough to get started in farming at a scale that could replace your income any time soon.
If you’re an accredited investor ($1M+ in investable assets), you have some interesting options including hedge fund and private equity participation.
But what about the rest of us?
For those of us who are interested in agriculture, have SOME investable assets, and will not inherit a farm; we do still have some options for investing in agriculture.
DISCLAIMER: I am a humble Ag Recruiter and Podcaster who is not qualified to offer any investment advice. These investment options are NOT recommendations in any way. All investments come with significant risk and should not be made without proper due diligence. Make sure to consult your attorney and investment advisors before acting on any of this information.
Below are six ideas for ways “the rest of us” could invest in agriculture. These are by no means THE ONLY six ways. In fact, leave a comment below with additional ideas you have for investing in agriculture.
Crowdfunding. I sat down with Chris Rawley of Harvest Returns to discuss their how their crowdfunding platform works. Essentially, it allows investors with as little as $5,000 to take an equity stake in a farming operation. Harvest Returns primarily works with accredited investors, but there are opportunities for the rest of us to get involved.
Crowdfunding sites are becoming more popular and will likely continue to provide opportunities for us to take part in agricultural investing as well as diversify an investment portfolio across geographies and commodities.
Peer-to-Peer Lending. Very similar to the way I described crowdfunding above, peer-to-peer lending allows investors to lend money in small amounts. The big differences is that you are not taking any ownership in the property or venture, but instead collecting interest on the principal.
Companies like Kiva allow you to lend to farmers in developing countries, while platforms like Lending Club and Prosper allow for more generic (not ag-specific) lending. These platforms also offer some great data on risk and expected return.
Publicly Traded Agribusinesses. This is the most liquid of all the options (meaning you are the most likely to get your money back out when you want it). Several agribusinesses have reached the point where they have “gone public” with an initial public offering (IPO) of their stock.
Shares of large corporate agribusinesses such as John Deere (DE) and Archer Daniels Midland (ADM) are available for purchase, as well as smaller companies such as Marrone Bio Innovations (MBII) and Calavo Growers (CVGW). There are many options, and I find Yahoo Finance very helpful to find publicly-traded companies in the ag sector.
Farmland REITs. A “REIT” is a Real Estate Investment Trust. This is a company that owns, operates or finances income-producing real estate (Investopedia). In order to qualify as a REIT, the company must comply with several regulations, including paying back 90% of its taxable income to shareholders.
For a very modest amount (less than $10 per share in some cases), you can own a small piece of a very large farmland holding company. Usually (but not always) these REITs make money by renting out the land. A couple of the larger publicly-traded farmland REITs are Farmland Partners (FPI) and Gladstone Land (LAND).
Commodities. I hesitated to even put this one on the list, because what most people call “investing” in commodities is really just speculating. If you dabble in buying and selling commodity futures without knowing how to protect yourself, you will likely get your head kicked in. It will not be pretty.
As with all of these, take your time to learn the risks and the market dynamics before putting real money on the line. That said, this is one way that you can “store” your money in an asset that will theoretically benefit if demand for agricultural products outpaces supply. You can also look at commodity funds such as Powershares DB Commodity Index Fund (DBC) that track all commodities.
Start Farming. While perhaps not a popular opinion these days, I do still believe it’s possible to get into farming, even without a million dollars. In fact, I personally know multiple first generation farmers that are making it happen.
This is by far the HARDEST and MOST TIME CONSUMING route that will require significant sacrifice, but I do believe it’s possible. Those that are making it happen are often finding niches, developing relationships with long-time farmers and landowners, working long hours, and making great sacrifices. But I hold onto belief that their hard work will payoff and they will continue to acquire equity and assets in their agricultural ventures.
What other investment opportunities do you see in agriculture?
I’d love to hear your ideas, thoughts, and opinions. This is an industry that has great challenges ahead, but also great opportunities for growth and financial returns.