Over time, no investment matches land as a buffer. Not in every year, certainly, but over time, no investment offers the correlation with inflation that farmland does—not the stock market, not the bond market, not even gold. “Farmland will continue to be a hedge against inflation,” says John Taylor, national farm and ranch executive for U.S. Trust, a Bank of America company.
One reason why? A lot of inflation is food, Taylor says. He sees farmland having the potential to increase by an annual growth rate of around 3.5% or more. Most experts don’t see inflation rising higher than that, on average, although black swan events, such as an unexpected expansion of the U.S. economy, could potentially ignite inflation, notes Jeff Swanhorst, AgriBank chief credit officer. “Most of the time, land as an investment performs better than the inflation rate,” Swanhorst says. He quickly adds that farmland is a good hedge against inflation—except in years when it isn’t. He specifically refers to the early 1980s to 1987, when farmland showed a negative correlation with the inflation rate.
From AG Web, April 2, 2014
by Ed Clark
