When it comes to investing, one of the most valuable skills you can have is being able to identify trends and capitalize on them.

For example, those who caught the trend of online shopping and e-commerce have done quite well with stocks like Amazon. On the other hand, those who had their heads in the sand did not do too well if they owned retail stocks, such as Macy’s.

Farmland hasn’t quite become trendy yet, but it is growing in popularity. It has transitioned from an investment that was out of reach to something you can now own with relative ease. All without getting your boots dirty.

Before diving in, it is important to understand the current trends within an investment. Based on a report by Farm Foundation, here are the most important trends farmland investors need to be aware of.

1. More people than ever before are investing in a “hands off” manner.

In this report, the Farm Foundation looked at the growth of operator versus non-operator landlords.

Operator landlords are those that own the land and also actively involve themselves in the farming activities. This is your typical farmer that owns the land he or she grows on.

Non-operator landlords are individuals or groups that own the land but do not actively involve themselves with the farming activities. Instead, they rent out the land to a farmer. These non-operator landlords are often large institutional investors. However, in recent years, many individuals have become non-operator landlords by making direct investments into farmland.

The USDA found that 30% of all farmland is owned by non-operator landlords, and that number is expected to grow in the future. This is because more and more people have stumbled upon farmland as an investment opportunity. They want to get in on the upside without actively involving themselves with the farming process.

2. Smaller farms are continuing to consolidate into larger ones.

Another important trend that has been seen over the last few years is consolidation. For those who are not familiar, this is when many smaller groups consolidate into a larger group. Crops like wheat and soy are considered to be a commodity, which means prices fluctuate based upon supply and demand.

Prices for certain agricultural commodities have been weak over the last few years, which has pushed a lot of smaller farms into consolidation. As much as we love to support small business operations, they simply cannot operate as efficiently as larger ones.

Larger farming operations operate more efficiently, creating economies of scale. Let’s say a farm is buying seeds. It would be cheaper to buy a much larger quantity in bulk rather than a smaller quantity.

Weak commodity prices have encouraged consolidation, whereas these new larger farming operations are able to take advantage of these “bulk discounts.” That means that we are seeing fewer farms, but much larger farms.

3. Low bond yields and a crowded stock market are pushing investors elsewhere for returns.

When it comes to earning a return on your investment, many investors look at stocks and bonds. Stocks are more for the growth of your wealth, while bonds are more for preservation.

Within the stock market, we have seen a flood of new investors. This is largely due to the rollout of commission free trading apps that allow you to buy stocks with the click of a button on your smartphone. While it is a good thing to see more people participating in the stock market, it has led many to worry about all of this new money pouring into the market. This could ultimately lead to bubbles forming within the market.

As far as bonds go, the yields have been low for years and hit record lows in 2020. During the global pandemic, the federal reserve slashed interest rates to near zero. As a result, bonds are not an appealing investment right now and they are not outpacing inflation in most cases.

As a result of the stock market being crowded and bond yields being at record lows, investors are looking elsewhere for returns. This has led many to explore alternative investments, such as farmland.

4. More individuals are making direct investments into farmland.

Lastly, the final trend worth mentioning is that more individuals are making direct investments into farmland. In the past, it was mostly large institutional investors making these types of investments.

Sites like KrogerFarms have opened the door for smaller investors who want to make direct investments into farming and agriculture without handling any of the day to day operations. The farmland investments on their site are fully vetted by a team of experts. On top of that, KrogerFarms manages just about everything for you. You simply pick and choose investments and passively invest in farmland.

It is now easier than ever before to invest in farmland as a smaller individual investor. This is one of the main reasons why there is expected to be a rise in non-operator landlords.

Final Thoughts

Before making any investments, it is always important to consider the trends. It is similar to sailing a boat. You want to have the wind in your sail. Farmland investing is growing in popularity for good reason, and it just might be the perfect addition to your investment portfolio.

If you enjoyed this article, please check out my beginner’s guide to farmland investing over on my blog Farmland Riches.