Farmland Investor Expectations
Tim Hammerich
News Reporter
About 31% of US farmland is owned by non-operating land owners, and farmland as an asset class continues to attract interest from investors. But given the state of the farm economy, can farmland continue to meet investor expectations? AcreTrader’s Rob Moore thinks so with one big caveat: those expectations need to be realistic and not based on expected farmer cash flow.
Moore… “ If you just silo American farmland, you should expect IRRs in the mid to high single digits. And I think for investors, when they're presented that product, honestly, again, this is a risk-adjusted return. The cash flow off of particularly row crop farmland in the United States in today's interest rate environment, nobody's coming here for the cash flow, and I think that's good. I think in twenty twenty and twenty twenty-one, there were a lot of people that got into the asset class saying, 'Man, the return here, the cash return is really interesting to me and the appreciation is the bonus.' And I think that's not only disingenuous, it does a disservice to the farmers and the industry writ large. The focus should not be on the cash flow off of the farmer. Our approach to the investor class has been, Hey, let's be really honest with you. This is a two to four percent cash-on-cash asset class.”
Moore says farmland investors need to understand the risks, liquidity, and modest historical returns before considering investing in farmland.
