Bankers and fund managers are scrambling to build up rural expertise in response to rocketing investor demand to buy entire farms as an inflation hedge.
Investment funds worldwide have put an estimated $15 billion to $20 billion in agriculture globally, and interest is also growing from ultra-rich investors and pension funds, which see farmland as tangible, strategic assets.
But Rich Gammill, managing director of the Cargill unit Black River Asset Management, which manages $6 billion including in food and agriculture, said farmland investments can be tricky.
“It seems simple, but agriculture is anything but. There is a global supply chain and lots of regulation, a lot of risks and factors that I think the traditional finance people on Wall Street do not have their heads wrapped around,” he said.
Many investors also want international holdings, requiring their advisers to navigate different tax and regulatory systems, as well as rules on foreign land ownership.
“There aren’t many Goldman Sachs bankers walking around rural China looking for dairy farms,” Gammill said.
In the United States, the $1.2-trillion farming sector remains less than one per cent institutionally owned, mainly because many investors don’t know how to get started, said Mary McNairy, a partner at International Farming Corp., an alternative investment firm.
“It is huge. The question is, how do you get into it, how do you access the market?” she said.