The case for investing in farmland.
Farmland has outperformed commodities over the long term and provided an inflation hedge in recessionary times.
A rising real estate investment sector
The importance of farmland to global food and energy security, environmental sustainability and economic growth is unequivocal, and continues to attract considerable interest from around the world. On average across the globe, farmland values have outperformed commodities over the long term.
Global population and future demand
With a rising global population and growing concern over climate change, the long-term importance of food and energy security is expected to continue, increasing demand for productive farmland.
Many agents see a buoyant outlook for UK farmland values. Savills predicted average growth of around 8% for 2020, and its research found that farmland and forestry outperformed all other UK assets over the previous ten years.
Worldwide farmland performance
Farmland is a strong performing asset. Investors are attracted by capital appreciation and the potential to maximise farming returns through active management, particularly in emerging markets.
Annualised growth in farmland over the past two decades
Annualised growth in Western Europe, 2002 to 2018
People added to the world’s population every year
World population expected by 2050
Expected increase in food demand by 2050
Food is the new oil. Land is the new gold.
Investors are drawn by capital appreciation and the potential to maximise farming returns through careful management.
A clear interest from governments and investors
Farmland continues to attract considerable interest from governments, government-backed investment funds and private investors. The supermarket group Lidl announced over £15 billion of investment in British food, farming and production over five years, and the National Farmers’ Union has described money invested in UK farming as money invested wisely.
The final verdict
Rising demand for the foreseeable future suggests farmland will become one of the most attractive asset classes to hold. The outlook is driven by long-term supply and demand fundamentals that point to appreciation of both agricultural commodity prices and the land that produces them.