Author Topic: Farmland REITs  (Read 649 times)

PDXTabs

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Farmland REITs
« on: February 12, 2020, 03:47:32 PM »
Right now I have no bonds and the only REITs I own are hidden in equities index funds. From time to time I consider diversifying into REITs, but what really interests me are farm REITs. Is that a horrible idea? There aren't many of them, and as far as I can tell there is not a farm REIT index, and that most (all?) of them are in the USA.

Is this a crazy idea?

Rob_bob

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Re: Farmland REITs
« Reply #1 on: February 13, 2020, 05:04:00 PM »
I have a few index REITs and more individual REITs.  I do not own any farm REITs.  You would think that everyone needs to eat so they would be a sure thing, but it's tough to be a farmer and I have steered clear of them. 

Maybe some of the big corporate farms are publicly traded, not REITs, just a regular business but I've never looked into that.

BTW, I live not too far South of PDX  :)

maizefolk

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Re: Farmland REITs
« Reply #2 on: February 13, 2020, 05:31:57 PM »
Over the long term, productive land in areas where you don't need to worry about water rights is probably going to be a really safe investment. In the short to medium term my guess is that prices will continue to fall for a while.

Farmland hasn't come down all that much from what it cost in 2012 when we were looking at $8/bushel corn. Between the soy tariffs, the incredibly wet/late planting season in '19, and years of comparatively low prices eating into farmers' financial reserves we're starting to see an increase in farm bankruptcies.

Most farmland prices are set at auctions where the buyers and sellers are both (usually large) family farmers and a given chunk of land comes up for sale maybe once in a generation, so even when prices are temporarily low, people will often do everything they can to buy nearby chunks of land  when it becomes available, which means prices some down slowly.

But if low prices keep going much longer, there will be a lot more land going on the market all at once and the neighbors who would normally be the ones to buy up the land if given the once in a lifetime opportunities to do so won't have the cash or cash flow to do so.

I'd also stay far away from any land depending on water rights to be productive, no matter how senior the rights. At some point states like Colorado, Arizona, and California are going to have to bite the bullet and rethink the whole water rights system and there are a lot more voters in the cities that need water than the farms that currently have priority access to that water.

Given how all of the pitfalls above is and how few farmland REITs there seem to be, I'd be inclined to give them a pass for now.