Farmland is one asset class that has been a favorite of billionaires for centuries and is a great way to diversify your portfolio. But is farmland a good investment?
Farmland investing has a long history of producing stable returns.The returns are due to increasing farmland values and the profit from the cash crops.
As the population keeps increasing, we need to build more houses, acquire more land for transportation, shopping, etc., reducing the amount of farmland available.
Farmers have pricing power for their crops. Food is not a discretionary item on any budget. Everyone needs food to survive, and we all will be willing to pay any price to eat.
If farmers can reduce costs with automation, the profit margins will increase. Implementation of mechanized farming increased the productivity of farmers compared to those who manually tilled their fields.
Farming is generally a family business. You would sometimes find farms available for sale where the owners are older and the children are not interested in the family farm business.