Real estate and balanced funds have been the undisputed benchmarks for low-risk, stable investment choices for generations. But what if you want to diversify? 

What if you want a different type of low-risk yet high-yield income opportunity?

You’ve come to the right place because, in this article, we’re going to discuss income generating farmland and 10 reasons why you should consider investing in it today.

1) The Law of Supply and Demand

The global population is forecasted to reach 9.8 billion by 2050 (up from 7.9 billion today). As the world population continues to grow, so too does the demand for food. As incomes improve across the developing world and dietary habits change, the consensus is that agricultural output needs to increase by 60% over the next 30 years.

Due to soil quality, water availability, and infrastructure, only specific areas of this planet are suitable for farmland. But, the availability of arable farmland, which sustains human life in so many ways, has been decreasing for years due to urbanization. Climate change also poses threats that make this precious resource even rarer than it already was before. Temperature change, for example, makes certain regions un-arable or less suitable for farming over time, while the likelihood of a sea-level rise makes coastal land unusable indefinitely into the foreseeable future.

So as the need for food grows in a world where arable farmland becomes scarcer, the fundamental economics of supply and demand dictate that the value of farmland will continue to increase.

2) Portfolio Diversification against Traditional Asset Classes

You may have heard the phrase “Diversity is your friend” before, well, it’s true! A diverse portfolio of investments reduces risk. If one asset class fails or an economic collapse occurs, other assets work in opposition to help make up for any losses.

As such, farmland is a wonderful asset to have in your portfolio. It’s negatively correlated with many other traditional investments and provides balance, which can help offset losses from stocks or any other assets you invest into when markets drop.

An investment in farmland doesn’t just offer portfolio diversification against traditional asset classes, but it can also provide cross-border diversification. With farmland prices at a premium in North America, investors can often find more profitable opportunities in countries where land prices and labor costs are still lower.

Paraguay, where we offer our agricultural investment opportunities, is such a gem of a country. Located in a strategic geographical location in South America, it has an abundance of natural resources and access to low-cost skilled labor and land. As such, it offers significant growth opportunities and higher returns.

3) Farmland Consistently Outperforms Stocks, Bonds, and Gold

Did you know that income generating farmland has consistently outperformed other asset classes?

The average annual return of productive farmland (in the US) has been over 10% for the past four decades. Over the same period, stocks returned less than 7% per year on average. Gold (7.3%) and AAA bonds (7.7%) also got outperformed by farmland returns, as did Real Estate Investment Trusts (8%). 

Farmland investments in other countries with lower land prices and labor costs can provide even better returns. Our orange plantation and greenhouse investment opportunities in Paraguay, for example, offer returns from 12% and 25% per year, respectively.

4) Income Generating Farmland is an Excellent Hedge against Inflation

A trip to buy your groceries or fill up your car and you’ll realize that prices of everyday necessities and commodities are rising more than usual. The threat of higher inflation is rearing its head, and financial experts proclaim in unison that now is the time to protect your investment portfolio against rising inflation.

Farmland, like other real-estate investments, has long proven to be a reliable hedge against inflation. Historically it has experienced growth during periods of rising inflation, and it’s not just the value of your land that tends to keep pace with inflation. The returns on your crops will also increase as the price of food increases.

Food prices have consistently risen in the last 50 years. While inflation averaged around 3%, the prices for agricultural commodities have increased about twice as fast as inflation over the long term.

Another reason farmland is a good hedge against inflation is that input costs, such as fuel and fertilizer, tend to go up incrementally at a slower rate than food prices. This lag between input costs and returns means income producing farmland remains profitable during inflationary periods.

Stocks, on the other hand, are not a hedge against inflation. If inflation goes up, then the price of commodities increases, which means higher production costs for businesses. As interest rates rise, borrowing costs will also increase because more money needs to go out on loans. Higher interest rates also puts pressure on the demand because consumers’ disposable income decreases, resulting in lower sales.

5) Investing in Farmland is Stable and Crisis Proof

Stocks are often subject to unpredictable swings in value, but farmland delivers low-volatility returns. Farmland provides stability no matter the factors that may be influencing global economic reports or world events because people will always need food for their tables.

The recent pandemic demonstrated that income from farming is extremely crisis-proof. While many industries ground to a halt, farms kept producing food, and supermarkets kept selling it.

Our two farms in Paraguay kept producing at total capacity as our farmworkers were exempt from any lockdown rules. The demand for our fresh, healthy produce far outstripped our supply. It shows that income generating farmland is perfect if you’re looking for solid returns without wild fluctuations.

6) The World’s Most Succesful Investors are Doing So

Many successful investors, like Warren Buffett and Bill Gates, already own farmland. They see the value in investing in income generating farmland. The returns are relatively consistent and will grow as inflation rises, while it is low risk compared to other investments with high ROI.

Warren Buffett wrote in a 2014 letter to investors that “farmland as an investment has no downside and potentially substantial upside.” In his most recent letter to his shareholders, he added that “Productive assets such as farms … produce wealth – lots of it. Most owners of such properties will be rewarded”.

Microsoft tech billionaire Bill Gates became the largest private farmland owner in the US in 2021, acquiring more than 269,000 acres in the past 10 years. It includes farmland in nearly 20 states that cultivate vegetables such as potatoes, soybeans, and carrots.

7) Farmland is a Better Retirement Investment than Stocks

Many people might assume that farmland would be an impractical asset class for retirement savings because of its difficulty to cash out or turn into liquid assets. However, from our own experience, we know that it is pretty easy to cash out income generating farmland with a proven revenue stream.

Several investors prefer to buy existing lots with mature trees and plants over new lots that still need to be prepared and planted. We assist existing investors who want to cash out and have always found buyers within a week.

The value of farmland is also less volatile and risky than stocks. Moreover, well-managed farmland generates fairly consistent annual returns that should be more predictable since food prices tend to rise along with inflation. So as your living expenses increase, so should your “pension” returns.

8) Farmland Returns are Less Subjected to Government Interference

Government actions have significant implications for the value of your assets. Printing more money or changing interest rates for inflationary reasons affects the whole economy, impacting everything from stocks and bonds to gold and real estate. New regulations can also lead to wild swings, such as curbs on the use of cryptocurrencies threatening crypto investors’ investments with steep losses.

But when it comes down to income producing farmland, the government wields little control because they don’t have that much power over food demand and price levels in either direction.

9) Farm Investments Support Local Economies

A farmland investment can have a significant impact on a region and community. A farm’s presence has shown time after time to be beneficial both socially as well economically. It helps provide jobs while also boosting local economies by introducing new ideas into these areas that can help transform them from being resourceless villages into thriving communities.

Both our farms in La Colmena and Nueva Italia, Paraguay, are great examples of this. Not only have we become the largest employer in those areas, but we are an integral part of these communities, organizing events for local kids and families while helping those in need during times of crisis.

10) Investing in Income Generating Farmland is Easier than it has Ever Been

To make good returns from owning farmland in the past, you pretty much had to become a farmer and invest significant amounts to benefit from any economies of scale. It’s therefore not surprising less than 0.5% of Americans own farmland, compared to over 55% who own stocks.

However, turnkey agricultural investment opportunities like ours mean making money from farming isn’t just limited to the Warren Buffett’s and Bill Gates’ of this world. We allow you to purchase an orange trees lot or greenhouse on one of our existing farms.

However, turnkey agricultural investment opportunities like ours mean making money from farming isn’t just limited to the Warren Buffett’s and Bill Gates’ of this world. We allow you to purchase an orange trees lot or greenhouse on one of our existing farms.

You receive clear title of the land, meaning you will profit from the land appreciation. In addition, you sign a farm management agreement, allowing us to farm the lot/greenhouse on your behalf. We take care of everything, from planting & harvesting to sales, and you will receive your share of the profits from your produce annually.

A turnkey, hands-off investment like this means you don’t need to become a farmer anymore to reap profits from farming. It makes farmland investing easier and more accessible than it has ever been before.

Conclusion

Income generating farmland provides an excellent hedge against inflation and is considered by many to be one of the safest types of investments in the world. Over time, you will see your wealth increase with reliable returns that beat inflation without taking on too much risk.

So if you’re looking to diversify your portfolio and follow the example of leading investors, why not consider investing in agriculture in Paraguay with us today?

We’re currently offering orange lots on our Nueva Italia II plantation, starting from $18,500. We also have a limited number of hydroponic strawberry greenhouses available for those looking to invest a more considerable amount. Contact us for more information.