Global Yields and Agribusiness Investment

Since 2009, the Dow Jones Industrial Average has gone from 7.000 points to more than 25.000 in 2018. Likewise, the S&P 500 has gone up from approximately 700 points in 2009 to over 2.700 this year. However, despite the positive economic performance of the United States throughout the last year, uncertainty remains high, particularly in light of the upcoming midterm elections. As global markets continue to be affected by the world’s political situation, investors might have a hard time finding good and stable returns through traditional financial instruments. The European and US equity markets are expected to yield approximately 4.0% and 6.5% respectively over the next 20 years. Similarly, government securities and money market funds have such low yields that they are struggling to compensate for average yearly inflation. Therefore, there are real worries of negative returns with these financial instruments. For example, in the case of both European and US government bonds, the expected 10 to 20-year average return is approximately 2.0%. Meanwhile, the yearly inflation target for most of these economies is 2.0%.

Global Yields and Agribusiness Investment

As individuals are living longer and needing more retirement income, stable and high-yielding investment opportunities are essential to society. Therefore, investing in real estate has become an attractive option because it represents tangible assets and lower risk. Furthermore, in the case of agricultural real estate, it has both productive value and appreciation potential. Thus, investors looking for double-digit return, without wanting to engage in an aggressive growth strategy and high risk, should consider farmland and the food industry; particularly in regions of the world where the agricultural sector is booming. Within the food and agriculture industry, there are many attractive sectors, including supply chain integration, commodities trading, and farmland operations.

The food and agricultural industry is becoming increasingly popular and liquid across the production line, from the grocery stores to the fruit fields in Latin America. For example, Whole Foods Market stocks in the US have gone from approximately US$5.00 in 2009 to more than US$41.00 in August 2017, when the company was purchased by Amazon. Similarly, the amount of agriculture-based exchange traded funds (ETFs) has risen significantly over the last years. Today in the US, there are over 30 ETFs focusing on agricultural commodities and more than five ETFs focusing on domestic farmland real estate. The organic foods market specifically and the agriculture sector in general are relatively new within the investment world. However, their increasing popularity as consumer goods and investment vehicles has led investors to greater liquidity, confidence, and economic yields.

Investors seeking real returns on real assets should consider the food and agriculture industry. Potential investment instruments for this industry include Real Estate Investment Trusts (REIT), Equity, and Limited Liability Corporations (LLC), amongst others. In the case of Farmfolio, our CEO Dax Cooke wants international investors to capitalize on agriculture as a unique natural resource by way of a new and innovative asset class. Farmfolio’s Farmshare offerings contribute socially and economically to the Latin American communities where they are settled by empowering them to grow and upscale their entrepreneurial vision, while yielding high returns for our clients and investors.

(Read more about Organic Agriculture Catering to Niche Markets)