Direct Farmland Investments in South America as an Inflation Hedge
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Farmland is seen as an attractive long-term investment that offers current income, capital appreciation, an inflation hedge and favourable diversification that is negatively correlated with traditional asset classes. Most investors have experienced wrenching declines in the value of their portfolios from time to time. Still, those with an agricultural allocation benefited from less volatility and positive returns to offset losses from the other asset classes.
Crop farmland has consistently produced a cash income of between 4% and 10%, in addition to capital appreciation.
A significant component of farmland total return is capital appreciation. As demand for agricultural products increases and the supply of arable land for agriculture declines, farmland increases in value. Purdue University found that the value of average-quality farmland in Indiana increased by 7.4% over the past 20 years.
Farmland positively correlates with inflation and is considered a classic inflation hedge. In fact, many investors view it as more favourable than other hard assets, such as gold, because farmland produces positive cash flow while shielding from the deleterious effects of inflation. World governments have a natural tendency towards creating inflation through deliberate conduct or the unintended consequence of well-meaning policy.
Farmland is negatively correlated with most traditional asset classes, including stocks and bonds and is only somewhat correlated with commercial real estate. This provides portfolio stability during volatile markets while enhancing a portfolio’s risk-adjusted return.
The arguments in this video interview are very valid even though it is aimed at the US farmland market. This is one of the reasons we help investors find farms, direct farming and direct farm development opportunities in South America. Not only are the returns higher in the short term the long-term macros look better than in the northern hemisphere.
GTSA Farm Investment Options
We work with some of the most experienced and respected farm administrators in Argentina, Chile, Paraguay and Uruguay, offering investors a range of options from outright farm purchases to managed options.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru, and Uruguay, providing expert advice on property acquisition and investment tours.
Post available in: English