The farmers in the audience were quite curious about farmland investing – especially as people turn to farmland as a hedge against inflationary pressures – and how it might affect their livelihoods.
Put more bluntly, folks were worried about a disconnected institutional investor from a big city micromanaging their operations and telling them how to farm.
We can’t speak for all investors, but when it comes to Farmland Partners, the message on this front is clear. Our company believes the best outcomes occur when production decisions are made by tenants at the farm level, and we know that most farmers are good farmland stewards.
As a REIT, we are passive real estate holders with limited operational influence. The bulk of our revenue comes from rent, not farming, so we’re careful to team up with skilled tenants who are efficient, responsible, and want to maximize productivity using environmentally responsible practices.
If we need to teach a farmer how to farm, then that farmer shouldn’t be a tenant of ours
If we need to teach a farmer how to farm, then that farmer shouldn’t be a tenant of ours.
This message seemed to ease audiences’ minds, which was good because our CEO also noted some unexpected advantages that farmers can see with increased investment in farmland.
Capital infusion in rural communities, access to experienced landlords with skill and size, and long-hold periods that enable stable, long term landlord-farmer relationships, are among the direct benefits. Investments in land productivity is another.
We mostly buy farms from other landlords, not direct operators. And these sellers are often individuals who inherited farms, weren’t interested in farming, and wanted to generate supplemental income on the side.
Landlords that fit that profile can sometimes be reluctant to invest in land improvements because it takes up-front capital and may not pay immediate dividends.
Improving a farm’s drainage by installing tiles, for example, can be expensive and labor intensive, but over time it will improve farm productivity by increasing soil uniformity, drying wet spots, and reducing erosion in fields.
A REIT with diversified holdings doesn’t view capital expenditures (CapEx) like tiling as a hurdle. Farmland carries less CapEx burden than many other forms of real estate, but investments like drainage tile can increase asset value and income-earning potential over the long haul.
This long-haul view also means we aren’t into land-flipping, which provides good tenants with stability and security as they scale their operations.
And that message seemed to be music to most farmers’ ears.
