Investing in farmland funds trumps "The Big Three" investments of our time.
Investing in Farmland Funds trumps "The Big Three" investments of our time. Annual statistics recorded between 1991 and 2011 on The S&P 500 Composite Stock Index, Gold and Housing prices (The Big Three investments of our time) reveal that farmland investors’ earnings have exceeded them all. Besting gold, the next runner up, by over 400%!
Housing and S&P 500 Price data as per Robert Shiller of Yale University http://www.econ.yale.edu/-shiller/data.htm. Gold data is the annual closing price as per the NYMEX Futures Exchange. NCRIEF Farmland Index is the industry standard for measuring composite returns for major institutional farmland investments. NCRIEF Farmland Index data as per The National Council of Real Estate Investment Fiduciaries http://www.ncreif.com/index.phtml
Wheat prices have soared over the past quarter century!
According to the US Department of Agriculture, Inflation and ever increasing worldwide demand have pushed the price of wheat to all time highs. Combine that with the fact that wheat is the Black Sea Farm Belt’s No.1 crop, and that farmland prices within the belt are among the most undervalued in Europe, and one can clearly see the investment potential of the region.
20 year average price for all wheat types as per data from the USDA.
Still at Low prices - Bulgarian and Romanian farmland are excellent buys.
Farmland prices of Eastern Europe are fast converging with those of Western Europe. The East will naturally not match the highest levels in those Western countries which have limited areable land, but values closer to the EU average are justified as vast quantities of high quality farmland are integrated into the European economy. The price of an acre of Black Sea farmland in Bulgaria or Romania is still priced at discount rates!
Farmland price data is from a combination of the Knight Frank 2011 Wealth Report, USDA and Black Sea Agriculture local data.
Bulgarian farmland’s annual yield trounces traditional investments!
The most recent data available on the average annual yields from the five most commonly held investments (Treasuries, S&P 500, CDs, Money Markets and Gold) reveals that the cash flow they’ve provided investors is dwarfed by the cash flow enjoyed by investors in Bulgarian farmland.
Treasury, CD and Money Market yield data as per BankRate.com; S&P 500 Index data as per Bloomberg; Farmland data as per Black Sea Agriclture for the Karvarna section of NE Bulgaria.
Since the 1970's Farmland Has Outpaced Inflation!
US Inflation statistics and farmland values collected between 1970 and 2008 reveal an impressive correlation. As Inflation has risen, the value of farmland has risen even more! Making an investment in farmland an outstanding hedge against Inflation.
Farmland prices are an average of the 3 major US farm states, Iowa, Illinios, Indiana per data from the USDA Inflation data (CPI) data per Robert Shiller of Yale Univ http://www.econ.yale.edu/~shiller/data.htm.
Wheat gives Bulgaria the potential to be a breadbasket for the world.
Over 50% of Bulgaria and nearly 80% of Romania is arable farmland. The humus-rich “Black Earth” of the vast Black Sea Farm Belt is ideal for cultivating more than a dozen crops. But most farms grow wheat, an exceptionally profitable commodity in today’s market. Bulgaria alone produces an average of four million tons a year! So it’s no surprise that 4 out of 10 Bulgarians devote their lives to farming.
Current USDA statistics on Bulgaria and Romania.
Bull Market in Farmland
The price of farmland has been steadily moving upwards for over a decade, picking up steam when emerging markets kicked in during the middle of the 2000’s decade. Note that during the current recession years, the price continues to move upward. Interestingly, the pace of growth in Bulgaria and Iowa were in percentage terms, almost exactly the same. The difference moving forward is Bulgarian land is still relatively cheap by regional and world standards.
Farmland Acts as a Hedge for Stock Portoflios
During bad years for stocks, farmland returns were strong. This makes farmland a good hedge for a stock portfolio. Additionally, even in good years for stocks, farmland still produces positive gains.
Farmland prices are an average of the 3 major US farm states, Iowa, Illinois, Indiana per data from the USDA Stock market (S&P Composite Index) data per Robert Shiller of Yale Univ http://www.econ.yale.edu/~shiller/data.htm