Investing in farmland

Farmland has a low correlation to other assets classes and has shown a very positive risk-return relationship for a number of years. This is reflected in the asset’s historical correlation to inflation as well as a return profile that is comparable to that of long-term bonds.

Historically, the demand for farmland was driven primarily by farmers wishing to expand their farms and thereby improve their operating profit by exploiting the economies of scale inherent in a larger area of farmland.

In recent years, the investment characteristics of farmland have encouraged institutional investors to enhance their focus on this asset class. The trend is most common among institutional investors in the US where investors like CalPERS and TIAA-GREF have invested in agriculture.

Investors have demonstrated a growing interest in farmland investment. Due to ownership regulations, this trend has not been widely followed in Western Europe, but in several Central and Eastern European countries where such restrictions do not apply, investors have acquired farmland. Jantzen Development assists investors in their acquisition of farmland in the region; an investment through Jantzen Development entails no developer risk. Furthermore, the investments can be managed by Jantzen Development.

The investor leases the land to a professional farmer. As the farmer does not have to achieve a return on the land investment, the farmer is willing to pay a significant portion of the profit from operating activities to the landowner as lease rental. By entering into 5 to 10-year lease agreements, the farmer gets access to the same economies of scale as ownership of the land would provide.