Curious about investment farms? An investment farm is an agricultural business operation acquired for financial gain. Owners, often institutional investors, aim for profits or tax deductions. Unlike traditional farms, they don't partake in day-to-day operations, hiring farmhands instead.
How Investment Farms Work
Navigating Agricultural Investments
Farming, a facet of the agricultural industry, involves various activities like food production, livestock raising, and crop cultivation. Investment farm owners, including pension funds and family offices, don't engage in daily operations. Many focus on commercial farming, cultivating cash crops such as soybeans, corn, wheat, cotton, and livestock like cattle and hogs.
Cash crops find applications across industries, from food products to energy. For instance, soybeans may be processed for oil, used as animal feed, or utilized in the plastics and paper industries. Biofuels, derived from renewable materials, like corn-based ethanol, showcase the diverse uses of cash crops.
Returns and Special Considerations
The Dynamics of Investment Farm Returns
Investment farm returns hinge on commodity prices. Higher commodity prices translate to greater profits. These farms attracted institutional capital between 2000 and 2014 but experienced a decline after a drop in agricultural commodity prices that year.
The U.S. Department of Agriculture (USDA) reports that 96% of farms in 2017 were family-owned, with large farms producing nearly half of the nation's agricultural products. Investment farms are integral to agribusiness, encompassing farming and related commercial activities.
Investing in Investment Farms
Navigating Agricultural Investments
Agricultural investments are often considered recession-proof due to the constant need for food. However, entering this domain requires meticulous planning. Investors might explore alternative ownership structures, like partnerships or real estate investment trusts (REITs) such as Farmland Partners and Gladstone Land Corporation.