In an uncertain economic climate, investors typically look for safe havens – places where they can expect low volatility and reliable income. Increasingly, they are finding it in agribusiness with a number of new companies offering services to help people invest in land. It’s a good bet now and a good bet in the future.
A new boom
A typical offer comes from a firm such as Crawford Park Farming AG. They offer their clients a chance to diversify their investment portfolios and invest in an asset which delivers tangible returns in the short term, as well as promising prospects for the future. This, they say, represents a great way to safeguard investment revenue in an uncertain world.
Those uncertainties can make business investing rather perilous. Since 2008, old certainties have been swept aside in favour of a new and more volatile economic landscape. Recent developments have done little to assuage investor nerves. What impact, for example, will the UK’s decision to leave the European Union have? How will the new President Donald Trump and his protectionist agenda impact the worldwide economy? In such situations, investors will naturally look to place a portion of their portfolio in what they perceive to be a safe place.
What CA AG Investments are betting on is that agribusiness proves to be that safe place, and the evidence is compelling.
Agribusiness is growing around the world. In many places, such as Africa, it is seen as a way of helping investors secure a reasonable profit, while also driving forward development. Investment in sustainable agriculture initiatives, for example, can increase yields, reduce the impact on the environment and increase the amount small-hold farmers earn. However, it’s also growing in more developed countries such as the USA, and with good reason.
The world’s population is growing fast and so too is its appetite. With a rapidly emerging middle class, in nations such as China, India and Brazil developing a taste for richer and more expensive foods, the world’s farmers will be hard pressed to keep up. Demand is outstripping supply. A sensible investment in agribusiness will not only be profitable, but is something the world needs.
Historically, this has also been an extremely solid bet. For the past 22 years, US farmland has returned a profit of just over 10% according to the NCREIF farmland index. Returns have also outpaced inflation in many different markets which makes it a good hedging strategy against future inflationary trends. Furthermore, good quality arable land with high quality soil is in short supply thanks to the increasing spread of urbanisation.
Making the most of it
The cards, therefore, are stacked extremely favourably for agribusiness investors. They have land which is in short supply, and a growing demand for food. It all points to a market which is likely to head in one direction. It’s a world of high growth potential and low risk which makes it precisely the kind of thing many people will want right now.