Farmland is continuing to be a hot commodity in the U.S. and abroad. In fact, since World War II it has risen in value at a steady pace every year except in 1983, and 1985 to 1987. Investing in farmland is has the advantage that the average person can research and understand this asset class quite easily, particularly as compared to some other more complicated asset classes. Farmland has the added advantage of being tangible; you can touch it, live off of it, and there are a variety of ways farmland can generate income.
Agriculture produced from farmland provides food for the world population, which sits at nearly seven billion people. Expectations suggest that this number will reach nine billion and counting over the next 30 years. However, there is only a finite amount of quality farmland to produce food. With rising incomes in emerging markets, there will be a significant demand for a higher quality diet, which includes more meat. The future global demand for food is one of the driving forces behind the increasing value of farmland every year.
The real estate market for cropland brings with it leveraged buying; mortgages allow acquisitions for a relatively small amount of money. Farmland tends to appreciate in value even when the markets fluctuate, giving owners a more stable investment than some other asset classes.
Although anyone looking to invest in farmland should check with their tax and financial advisors, there can be tax benefits associated with investing in farmland. Interest paid on the mortgage against farmland can tax deductible. There are types of farm lease arrangements which provide tax benefits along with depreciation or deduction expenses.
A survey of local farmland brokers in Iowa revealed that the average price of the highest-quality farmland was $11,674 per acre. Even the average quality of farmland was $8,300 per acre.
Due to increasing value of farmland, especially in Iowa, many farmers have made significant profits from their current farmland holdings (although of course, past profitability does not necessarily equate to future profitability).
Farmland in the United States is also growing as a foreign investment. In 2013, a Chinese firm called Shuanghai came to the public eye when it purchased Smithfield Foods for a record price $4.7 billion. According to the U.S Department of Agriculture data, the firm also invested over $500 million for more than 146,000 acres of farmland across the US making them one of the biggest foreign owners of US agricultural land.