Many people are finding that agricultural real estate can be very valuable, since there is only so much arable land while the world’s population is growing. However, too many people think that the only way to invest in agriculture is to buy a farm or invest in farmland directly. Here are 3 ways to invest in agriculture without a farm or owning something you cannot divest yourself of.
Invest in Real Estate Investment Trusts
A real estate investment trust buys, sells and often manages property. Instead of buying a rental house, one could buy shares in a real estate investment trust that buys apartment buildings. It may build them and then rent them out, buy and rehab before selling or a combination of strategies. The benefit of a real estate investment trust over owning the property directly is three-fold. First, you gain liquidity. You can sell shares of the real estate investment trust far more easily than you could sell a plot of land if you need money.
Second, the real estate investment trust manages the land or real property, so you don’t have to do the work. Let them turn industrial property into a vertical farm or greenhouses. Third, they can manage the property in a way to generate dividends, such as leasing some land to tenant farmers, renting out silos and feed lots to farmers and otherwise generating cash flow.
A similar strategy to buying REITs would be investing in companies that develop tree plantations, aquaculture ponds and other agricultural projects. Now you’re investing in the industry without the risk of investing in a particular venture. Companies like Crawford Park Farming AG provide investment opportunities they’ve selected and literally cultivated.
Agriculture futures are often called the best agriculture investments since you can make money without owning the commodities themselves like a ton of soybeans or corn. However, agricultural commodities are more a matter of ensuring that farmers get the prices they need to break even on the crop and locking in suppliers’ costs. They can be used as a speculative investment, but this isn’t wise for the average investor. The better choice is to buy exchange traded funds or ETFs that invest in agricultural futures along with other things. Now you’re gaining the upside of futures when the trades go your way with far less risk. And these ETFs are required by law to be very liquid, so they only invest in the most widely traded commodities.
You can invest in real estate investment trusts that focus on agriculture, whether they are building vertical farms or renting out silos to farmers who need to store their harvest. You can invest with agricultural developers who buy farms that are ready investment opportunities or need a few years to literally mature. You can invest in agricultural suppliers like agri-chemical companies. Or you can buy exchange traded funds that mix agricultural commodity futures and agricultural stocks to maximize yield.