If you’re looking for a meaningful investment, one of the best things you can invest in is farmland. You might shrink back at the idea of yourself in overalls and plaid, but worry not: you don’t have to own a farm to reap the benefits of farmland investment. Using various investment opportunities, you can enjoy a bountiful harvest in more ways than one. Here are just a few of your options for a first-time agricultural land investment.
If you’re not ready to involve yourself directly just yet, you can invest in the equity of several publicly traded firms. Several firms, like Fresh Del Monte Produce and Cresud, invest directly in crop production. Others invest in companies involved with farming support, like Archer Daniels Midland Co and Deere and Co.
Farming ETFs and mutual funds
Agriculture stocks and commodities are part of some exchange-traded funds. Mutual funds have investments in something other than farming, so if you’re considering farming specifically, you might think about another investment.
Farm Bureau has a line of agricultural mutual funds, and Fidelity Global Commodity Stock Fund invests in agricultural commodities.
Another way to invest in farmland is through a real estate investment trust (REIT). Instead of buying a farm, you purchase shares of a farm leased to tenants. You don’t have to do any physical work to reap the financial benefits.
Each REIT represents a specific part of the farming sector. Your REITs prospectus will tell you if it invests in the farmland sector you’re looking for.
Directly invest in farmland
You can invest in farmland directly through companies like FarmFolio. These companies let you choose the farms and fields you’re interested in, and you purchase shares in the entity that owns it. You share in the farm’s profits based on the number of shares you purchased.
The only problem with this approach is that you have to qualify as an investor. Accredited investors must meet SEC and Regulation D requirements. Because accredited investors can only directly invest through these companies, this route is best for more mature investors.
You can also invest in products produced on farmland, such as soybeans, corn, and cattle. Yet another option is investing in commodities funds, which are ETFs that reduce the risk of investing in commodities markets and offer you more exposure.
Commodities are risky investments because their price depends on uncertain events that affect their supply and demand. Be aware that trading in commodities will complicate your income taxes at the end of the year.
Farmers have had problems raising capital for their farming operations for decades. Bank loans are the only option available to many farmers, but qualifying for these loans can be difficult. If the bank loan doesn’t go through, farmers must rely on family and friends.
The Jobs Act of 2012 streamlined the financing process for farmers. Title III allows companies to raise money through crowdfunding and issue securities.
Crowdfunding allows farmers to approach smaller investors about raising money. Investors can add farming to their portfolios without buying a farm.
The non-accredited investor cannot invest too much, which means they have limited risk. These proto-investors also have voting rights.
Equity crowdfunding gives investors shares of a company for their investment. Examples include Harvest Returns and Farmfundr.
As you consider each option, consider how much you want to invest and whether you meet the requirements for the type of investment you’re considering.
Once you’ve found the best farmland investment option for you, you’ll have another income stream in your portfolio, and the farming industry will benefit from your investment.
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