Soil wealth: Regenerative farmland as an asset class

Progress: In times of uncertainty, including economic recessions or the COVID-19 epidemic, investors are often left searching for “safe” tangible assets, such as gold and land. As of 2018, roughly 52 percent (900+ million acres) of the US landmass is used for agriculture – i.e., rangeland, pasture, and cropland. And 31 percent of this acreage is owned by non-operators who rent the land out to tenant farmers. With these factors in mind, it may not be surprising to hear that America’s farm real estate market (land and structures) is worth approximately $2.55 trillion. The investment case for farmland is based on two main factors:


Performance: Farmland is an attractive asset class because it offers several stable streams of income. Landowners can make money from the cash rent that farmers pay to use the land, in addition to revenue-sharing agreements and the steady increases in land value. Between 1992-2018, farmland averaged annual returns of about 10% (income + price appreciation). And while some asset classes can lose up to 50 percent of their value in a single year, the farmland index hasn’t had a negative year in the last 20 year period. Moreover, the value of farmland should continue to increase as the amount of US farmland shrinks at a rate of 3 acres per minute and food demand grows.


Diversification: Beyond generating regular rental income and hedging against inflation, farmlands uncorrelated returns compared to traditional asset classes, such as stocks and bonds, make it a strong diversification tool. During the 2008-2009 Great Financial Crisis, the farmland index was up more than 20 percent. Thus, owning agricultural land can increase average annual investment returns while decreasing portfolio volatility

The Growing Problem

In the past decade, a new cohort of farmland-focused private equity funds has grown assets under management from $3 million to $30 billion. Unfortunately, this injection of profit-oriented private financing has flowed towards industrial commodity agriculture – perpetuating techniques that deplete soil carbon stocks while emitting nitrous oxide (N2O) and carbon dioxide (CO2). Decision-making power is shifting to stakeholders with little to no farming experience as high net worth individuals and institutional investors take control of assets in the food and agriculture sphere. And up until recently, farmland as an asset class has remained unavailable to retail investors due to illiquidity, steep capital requirements, and poor transparency in the marketplace. Fortunately, new services like Tillable, FarmTogether, and AcreTrader are reducing the high cost-to-entry for farmland investing while keeping educated farmers in control. Yet growers looking to finance sustainable agriculture projects were often ignored until recently.

As the Biden administration pushes to expand programs that offer farmers financial cost-share and technical assistance to implement eco-friendly practices, a new wave of organizations are identifying degraded land assets and leveraging regenerative agricultural principles to restore them to a higher environmental purpose: Dirt Capital helps producers access financing to acquire land and equipment for sustainable food production; Propagate Ventures connects landowners with financing channels to implement agroforestry systems that add value to land through fruit, nut, and timber crops; Steward’s marketplace enables individual investors with as little as $100 to buy into its Farm Trust, which has already allocated more than $2.5 million in loans across a portfolio of 40+ regenerative farm projects; And Farm’s platform identifies undervalued land in the Great Plains, in addition to different paths to restoration through agriculture and green energy. 

Soil Equity

Restoring undervalued farmland can generate outsized ecological benefits and investment returns through land appreciation and new ecosystem service markets that help farmers monetize regenerative techniques like holistic planned grazing. In doing so, investors and food producers have an extra incentive to improve the long-term productivity of arable land. These technological shifts will help to catalyze a new natural capital market for sustainable agriculture that offers retail investors risk-adjusted returns while granting innovative farmers (of all genders and sexualities) access to custom-tailored funding. An investment in agriculture that sequesters carbon and improves soil fertility will go beyond financial returns by maintaining and enhancing agroecosystems now and for future generations. 

Watch: Patagonia’s most recent film, “Bring Hemp Home: Colorado,” follows the story of two potato and barley farmers transitioning towards sustainable hemp production in Colorado’s San Luis Valley. The outdoor retailer’s most recent documentary is part of an ongoing environmental responsibility campaign centers around reintroducing hemp production to the states. When the 2018 Farm Bill legalized industrial hemp cultivation in most states, Patagonia began supporting US farmers looking to transition from growing extractive crops (cotton, corn, and soy) to this drought-tolerant, soil-friendly plant. 

Leave a Reply

Your email address will not be published. Required fields are marked *