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Although institutional investment in agriculture remains minimal, this could change with structural shifts on the horizon.
According to asset managers, a window is emerging for institutional money to flow into agriculture due to change of ownership, notably in markets such as Australia and the US.
Agriculture, although barely an emerging investment option for all but a few institutions, it consistently outperforms other asset classes. The level of institutional investment in US farmland is estimated at less than 2% of the entire US$2.5trn market. According to the Australian Bureau of Statistics, the estimated proportion of agricultural land with at least 20% foreign interest was 13.4% in 2018. That figure remained relatively stable over the past three years at between 13.4% and 13.6%
Proponents see investment in agriculture as an inflation hedge because it has no correlation to economic cycles that affect other asset classes. Its deterrents include a lack of understanding the problem of achieving scale in a fragmented, often family-owned sector.
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