This is the third of a three-part series on real estate trends. This post focuses on farmland and highlights some things I heard at the annual convention of the American Society of Farm Managers and Rural Appraisers.
- Agriculture is a $3 trillion industry in the United States, and $2.4 trillion of that is in real estate.
- Crop-producing farmland has posted tremendous capital gains in the past eight years.
- Prices have risen to record levels, and investor returns are at historic low levels.
- The low debt-to-asset ratio of just 11 percent means that any decline in farmland prices is unlikely to cause a banking crisis like the 1980s.
- Large pension funds are interested in investing in farmland, and their interest is growing.
- Ag land prices are not highly correlated with stocks or bonds. They allow investors to get some protection from big swings in stock and bond prices. Farmland is correlated with commodity prices, gold and the Consumer Price Index.
- These pension funds are expanding their investment horizon into land that produces fruit and nuts.
- Net income to farmers is expected to be lower in 2014 when compared with the past two years. But income is still high relative to long-run income trends.
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