Farmland as an investment

Market to Market | Clip
Sep 23, 2022 | 2 min

Farmland as an investment


Farmland is as much for agriculture, as it is for investing. The ROI on ground closely follows the 10-year treasury yield. . 

Randy Dickhut/Farmers National Company "Well, historically, the return or ROI on farmland kind of coordinates are as follows the 10 year Treasury yield. They kind of follow each other until here recently, when Treasury rates were below 1%. But farmland returns stayed about two and a half 3%. Now with the interest rates going up that Treasury rates going up, so will we see the return on farmland go up? You know, that's, that's one question. And that happens either by land values coming down, or the income going up. That's still to be played out for one. But where interest rates have gone so far on farm mortgages haven't really affected the farm prices a lot. 

Randy Dickhut (Di-coot) spent more than twenty years with Farmers National Company, the nation’s leading agricultural landowner services company, most recently as senior vice president of real estate operations.  

Randy Dickhut: You know, some of the purchases of farmland are with cash only, or only a 50%. mortgage on it. So a lot of cash in the market, still working out for some people. But if those interest rates move up pretty quickly, and you know, significantly more, I think it will have an effect on land values, you know, one is for those having to borrow will get more cautious. Absolutely. And the second is, will you want a little better return? When you can go out and get a CD for four or 5%. You know, people start thinking of safe investments and farmland historically, but also we've got the inflation piece going on. And again, historically, real estate assets. Great, especially farmland are considered a good inflation hit. So you got interest gone up, but you got inflation hedge.