Institutional Investors Eye Farmland

WORLDWIDE - Institutional investors, including those backed by retirement funds, public and corporate pension funds, and universities have been buying up agricultural land in North America as well as worldwide. A variety of factors are leading analysts to predict that this "land rush" is far from over.

Who are some of the largest institutional investors of farmland in the US and abroad? The details of land acquisition are not always public, and many funds own properties through a variety of investment vehicles, often obscuring the true scale of the purchases. However, here is a partial and incomplete list:

1 million+ acres owned or managed - TIAA-CREF Pension Fund (Teachers Insurance and Annuity Association of America): As of December 31, 2012, "TIAA-CREF owns or manages approximately $4 billion in high-quality farmland – more than 600 properties totaling more than 1 million acres – in major grain-producing regions including the United States, Australia, South America and Eastern Europe," according to a company press release.

725,000+ acres owned - Adecoagro SA (NYSE: AGRO): As of December 31, 2011, Adecoagro owned a total of 725,065 acres, with farms in Argentina, Brazil, and Uraguay. Soros Fund Management was Adecoagro's largest shareholder at the time of the report, with George Soros, the billionaire hedge-fund manager controlling more than 20% of the South American farmland venture. Source: Oakland Institute, 2012.

434,000 acres owned - Altima, a British-owned Hedge Fund: Investment vehicles include Altima One World Agricultural Fund (AOWAF), Altima Farmland Fund (AFF), and Altima Agriculture Equities Fund. Key Investors: International Finance Corporation (IFC) [invested $75 million in 2009]; other investors unknown. Source: Oakland Institute, 2012.

~290,000 acres owned or managed - Hancock Agricultural Investment Group: The company deals mostly with institutional investors, including public and corporate pension funds and corporate taxable investors. "We oversee nearly 290,000 acres of prime U.S. farmland in major agricultural regions including California, the Midwest, the Mississippi Delta, the Pacific Northwest, the Southern Plains and the Southeast," boasts a statement on the company's website.

“I’m convinced that farmland is going to be one of the best investments of our time. Eventually, of course, food prices will get high enough that the market probably will be flooded with supply through development of new land or technology or both, and the bull market will end. But that’s a long ways away yet.” – George Soros, June 2009.

Alternative Investment Firm Aquila Capital recently made a statement explaining the current land boom. In addition to the growing worldwide demand for food, climate change and land degradation resulting in a decreasing supply of arable land are the most significant factors driving investment returns from farmland, according to a press release.

"There are powerful macro trends supporting farmland as an investment: every day, 30,000 hectares of farmland are lost as a net 200,000 is added to the world’s population," said Detlef Schoen, Group Head of Farm Investments at Aquila Capital.

"Investing in farmland is still a nascent asset class, representing an average of only 1.3% of investor portfolios: however 23% say they are looking to raise their exposure to farmland over the next one to two years and only 2.3% plan to reduce it," stated a press release from Aquila Capital.

It's no surprise why investors are interested. According to the NCREIF Farmland Index, the average return on investment for agricultural land investments surveyed by the index was more than 17% in 2012 and more than 19% in 2013.

Even as the price of farmland surges, investors can get a return from the land's appreciation as well as rent paid by tenant farmers.

Current land prices are high, but what will be the long-term effects of large-scale investment of agricultural land?

These are the largest known land-buyers over the past decade, according to a 2012 Oakland Institute report:

TIAA-CREF 

Oakland Institute, 2012 

Hancock Agricultural Investment Group 

Aquila Capital 

NCREIF Farmland Index