Benzinga Money is a reader-supported publication. We may earn a commission from the advertisers associated with this article. Read our Advertiser Discloser.
As interest rates reset and inflation erodes real returns, accredited investors are rethinking where to allocate capital. Many are turning toward real assets that can preserve wealth and provide long-term stability. One of the most overlooked? U.S. farmland.
The United States has approximately 880 million acres of farmland, yet the supply is shrinking. Over the past decade, the country lost 22 million farmland acres, roughly the size of Indiana, to development and climate pressures. Meanwhile, nearly 40% of farmland is expected to change hands in the next 20 years as aging farmers retire.
This creates a compelling environment for farmland ownership. Historically, farmland has generated ~11% annualized returns over 85 years, with half from appreciation and half from cash flow, and has delivered real returns around 6% above inflation, providing a hedge in times of monetary uncertainty.
Traditionally, farmland investing has been difficult for individuals. Outside of direct farm operators, ownership was concentrated among families or billionaires.
Today, accredited investors can access the same opportunities as institutions through Farmland LP, a farmland investment manager founded in 2009. With $300M+ in assets under management, the firm acquires conventional farmland and transitions it to higher-value, organic production at scale.
Microsoftʼs Climate Innovation Fund recently invested in Farmland LP’s Vital Farmland III (or Fund III). Microsoft will have first right of refusal on Farmland LP’s Soil Carbon Credits, which the company plans to develop on its more than 19,000-acre farm portfolio and expand the market for regenerative soil carbon credits.
This investment adds a new, nontraditional revenue stream, and shows that regenerative agricultural practices provide economic benefits to farmers.
Strategy: Converting Farmland for Higher Value
Unlike passive ownership, Farmland LP follows an active value-add strategy. The firm identifies farmland with the right climate, soils, and water rights, then invests in conversion to USDA-certified organic production and permanent crops.
This transition drives higher yields and stronger margins:
- Rents have increased from $300 to $775 per acre post-conversion.
- Revenues per acre have increased from ~$1,000 to as much as $20,000 with permanent crops.
By managing farmland as both an income-producing and appreciating asset, Farmland LP delivers returns while meeting the growing demand for organic food. Organic food sales now represent more than 6% of U.S. grocery spend and are growing at 12% annually, yet only 1% of U.S. farmland is certified organic.
Results that Speak for Themselves
In addition to furthering their commitment to organic farming, Farmland LP utilizes crop diversification as part of its strategy to create higher returns for their investors.
Take the 4,000-acre, 150-year-old Burns Farm in Northern California as an example. Before Farmland LP acquired it for $29.5M in 2013, it had grown the same three crops for 50 years, rotating them approximately every five years, and no organic acres nor permanent crops.
Within 10 years, Farmland LP created 2,910 acres of certified organic and permanent crops, planted 12 diverse crops, and modernized irrigation. This resulted in a $92.3 million appraisal value (3.1x increase in value), and a 2.3x increase in revenue/acre (from $347/acre in 2013 to $809/acre in 2023).
Farmland: A Hedge Against Inflation and Currency Risk
Farmland is a physical, productive asset that generates income from growing food. As food prices rise with inflation, both the income and the value of the land tend to rise as well. This makes farmland a strong hedge against inflation, unlike stocks or bonds, which can lose real value when prices go up.
The National Council of Real Estate Investment Fiduciaries found that U.S. farmland had a 10.15% rate of return over the last three decades (1992-2024), slightly lower than S&P 500’s 10.5% return rate over the same time period, but with much less volatility (6.8% vs. 17%, respectively).
Furthermore, farmland generated stable and positive real returns during high-inflation years, whereas stocks and bonds experienced losses during those times.
Farmland LP is currently raising $250M for its third fund, Vital Farmland III (or Fund III). As of Q4 2024, Fund III has raised $125M and acquired ~4,800 acres, in Oregon, California, and Washington State. Its first two funds raised $65M and $135M, respectively.
For accredited investors, farmland represents an opportunity to participate in an essential asset class that combines appreciation, income, and inflation protection. With a minimum investment of $100,000, Farmland LP provides direct access to institutional-quality farmland at a time when more acreage is coming to market than at any point in the past 15 years.
Disclaimer: Please be advised that alternative investments carry a risk of monetary loss. Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. All information contained on this website is provided as general commentary for informative and entertainment purposes and does not constitute investment advice. Benzinga will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on this information, whether specifically stated in the above Terms of Service or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
