Spotlight:
US Farmland 2015

US Farmland
Unlocking the Full Potential

1 June 2015, by Hugh Coghill

Agriculture is a complex and globalised industry where investment is usually medium to long-term.

In this our fourth continental Spotlight, the others available being Ireland (2011), Australia (2012) and Sub Saharan Africa (2013), we have decided to look at the US with the help of our Associate, John Cottingham, who has lived and operated in the market place for many years.

The key to successful investment in any farmland market is an understanding of its agricultural industry. In a mature market, such as the US, information is readily available providing data for enterprise profitability, domestic and international trade, infrastructure and the key agronomic variables which include market and climatic volatility. The knowledge accrued from this information will underpin the risk and return profile to match the investor criteria whether they be private or institutional.

 

The US is an established market given its level of maturity in terms of global agriculture and farmland values versus other countries. It operates against a background of political stability and a strong currency. Furthermore, farm incomes have surged over the past decade through a combination of booming commodity markets and low interest rates, but we see that on sound analysis, a clear set of investment criteria and selecting the right product the US still has rewarding farmland investments to offer. Maximising the performance of farmland as an asset in the US is closely linked to enterprise and therefore regional choice. The question is when and in which region to invest?

Investors in agricultural land are generally looking for ways to benefit from the worldwide demand for food and energy linked commodities. With the US at the forefront of world production and export, the market deserves consideration.

We have focused our analysis on the regions where we believe the best opportunities are currently. We classify the best opportunities according to productive enterprise and focus in on the top performing productive assets available in the US for that particular enterprise.

The US farmland market is multifaceted in terms of enterprise size, soil type, water availability, ownership structure and varying foreign investment policy on a state-by-state basis. This report identifies the constraint on investment performance and illustrates the ‘real’ opportunities available, which can be tailored to the needs of both private and institutional investors via a range of investment vehicles. For example, the private investor whose criteria is based on commodity production and has the ability to acquire scale, with the potential for growth through further aggregation during the term of investment, may concentrate their search in the Corn Belt. Whereas those looking for more specialist cropping ring fenced opportunities might be drawn to the lower reaches of the Mississippi or the productive permanent crops of California.

There are many challenges and obstacles to overcome in order to unlock the full potential of US ‘land capital’, but with the right knowledge and strategy, farmland investors have the ability to acquire assets of significant value and potential. We hope that this Spotlight proves of interest and, if so, that you will contact us if you would like to explore opportunities further.

Articles from Spotlight: US Farmland 2015

The Size of US Agriculture

With agricultural land accounting for nearly three-quarters of the US’s total land area, it offers a rich diversity.

Weathering the Economic Climate

There is a wide variation of profitability across different crop types in US farming.

Variation in Farmland Values

Average farmland values in the US are strongly correlated with commodity price movements.

Leasing vs Owner Operated

Farming the land in hand will give an income yield premium, while leasing mitigates climate and price volatility risk.

US Farmland Case Study

01 June 2015

US Farmland Case Study

The Corn Belt is ideal for the private or smaller scale investor.

A Question of Ownership

Understanding policy on foreign ownership is key to successful investment in US agricultural land.

Farmland Outperforms Alternative Investments

US farmland continues to outperform other investments, such as residential property and retail.

Global Investors Are Looking West

The US’s five world cities attract a wide range of overseas investment for a variety of different reasons.

Right Product, Right Place

Farmland and agriculture in the US can offer real value for investors.

 
 

Key contacts

Ian Bailey

Ian Bailey

Director
Rural Research

Savills Margaret Street

+44 (0) 207 299 3099

 

Nicola Buckingham

Nicola Buckingham

Associate
Rural Research

Savills Margaret Street

 

Hugh Coghill

Hugh Coghill

Director
International Farmland

Savills Margaret Street

+44 (0) 20 7016 3818

 

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