May 16, 2022  

One of the accepted "givens" in financial management is that owning real property (homes, commercial real estate, or land) is typically a good hedge against rising inflation. Right now, inflation and how to deal with it is on everyone's minds. One of the often-mentioned reasons for buying and owning farmland is that it is also a hedge against rising inflation. The following chart from Dr. Allen Featherstone from Kansas State University demonstrates that point.    

The analysis uses USDA land valuations which are an average of all types of farmland in a state. Annual growth rates are calculated for two time periods and are shown for nominal growth and for real or inflation-adjusted growth. The numbers in red are not negative but show the differences in growth rate between the two time periods as explained at the bottom of the chart. Nominal and real growth rates are positive for all. 

The key takeaway from this analysis is that real annual growth rates for farmland are in the range of 2% above the inflation rate over time. This is why farmland is considered a good hedge against rising inflation and why some are buying farmland today.  

 

Randy Dickhut  

Senior Vice President - Real Estate Operations 

Register online to receive email updates