Agricultural Investing Heats Up

Agricultural investing is getting a lot of attention lately. A few examples follow:

1) It’s interesting to see a major university endowment get behind the idea of farm investing in a fairly significant way:

George Washington University’s investment office, which manages the university’s $1 billion endowment fund, will lift farm investments to 10 percent of its portfolio, said Rodney Lake, an analyst at the university.

…The university’s investment office sees 10 percent to 15 percent as “the appropriate rate of return prospect” on its agriculture investments, according to Lake.

More here.

2) On a related note, one fund manager is arguing that free-range goats in Australia may deliver a 12% rate of return:

The goats are harvested by fencing off watering holes that are accessible via “tiger traps” which can be shut to trap the animals, Hannen said. Land can be bought for A$10 ($7.96) an acre, and the project’s biggest investments are in fencing and water supply, he said.

“Goats being goats, basically you have a low-cost enterprise in an arid land, and the world is becoming more arid,” Hannen told the conference. “You have to keep probing at the frontiers.”

3) Finally, there has been a good grounded (literally) discussion of farmland investing over at Bogleheads recently:

I have 300 tillable acres "custom farmed". That refers to hiring the labor and machinary of farmers to perform the various services: planting, spraying, combining the corn and soybeans. This is active management on my part. The net returns on these acres are the highest and were roughly 10% last year(based on the current value of the land, using the value of what I actually paid for the land I get 16%).

The other 220 tillable acres are rented out on a "cash rent" contract to a AAA corporate client. Based on the current market value of this land I get a 7% return. The returns based on what I actually paid are higher, for 138 of these acres the return is actually 20%.

More here.