Wealth

Professional:

Could

Returns

be

Growing

on

Canadian

Farms?

By David Kitai

August 15, 2024

Excerpt from article:

Investors have been funneling money into novelty for decades. Our obsession with what’s new, revolutionary, and potentially world-changing has seen tech become the leading equity growth sector. Themes like AI have occupied most of our mental real estate, and investments as wide as utilities, commodities, and real estate have all been tied back — however tenuously — to that same theme. In investors’ drive to be ahead of the curve, they often miss value in more fundamental industries. That includes perhaps the most fundamental industry: agriculture. 

Farmland, especially Canadian farmland, offers a very interesting returns profile right now. Demographics and economics are behind it. The world is growing, the world is getting richer, and that growth demands more crops. It trades at an attractive valuation, with a tendency to mean-revert. Perhaps most importantly, in a period of low growth and high inflation farmland tends to perform exceptionally, because everybody needs to eat.

“What I like about farmland is that the macro is really powerful and simple to understand,” says Stephen Johnston, Managing Partner at Omnigence Asset Management. “But on the portfolio side, there are a lot of benefits from adding farmland to a 60/40 portfolio. It’s genuinely diversifying, with very low correlation to traditional asset classes, and it maintains that lack of correlation during market events. It has very non-volatile returns, but still has high nominal rates of return in aggregate.”

Original article here