dsmWealth: October 6, 2022

Stocks are swooning, bonds are nothing to write home about, and even cash is no safe haven in these days of mounting inflation. Look around you to the nearest cornfield. Or bean field. Either way, farms as an investment can make sense as a way to bolster returns, counter inflationary pressure and diversify assets.

In a report from advisory group Green Street, released by Barrons, U.S. farmland in a 25-year period ending in March 2021 was estimated to have posted an average annual return of 11.2%. Compare that with stocks tracked by the S&P 500 Index, which showed a return for the same period of 9.6%.

"Farmland has been very, very profitable," said Doug Hensley (pictured), president of Hertz Real Estate Services in Nevada. "It’s been a really positive asset class forever."

There are 2 million farms in the United States, and every year tens of thousands of them go up for sale as farmers die or retire and sell their property. Hensley, whose firm sells farms, said about 30% of Iowa farms that sell go to investors. Buyers can be anyone. They can be local or spread across the country, although he sees very few farms sold to foreigners. These investors would then hire a firm such as Hertz to manage the farm or perhaps rent cropland to neighboring farmers.

There are lots of different crops—wheat, rice, sorghum, cotton. In Iowa, Illinois and most of the Midwest, corn and soybeans are king (they alone represent 50% of all U.S. cash crop sales), so in this respect, a handy way to size up the ability of the land to deliver a bumper crop is measured by its corn suitability rating, or CSR.

The higher the CSR, the better your chances. The higher the selling price, too. The Minnesota Crop Productivity Index (CPI) ratings also provide a relative ranking of soils based on their potential for intensive row crop production. Every farm should carry a CSR-CSR2 rating, which in Iowa will range from the 40s in the south of the state to the 80s in northern counties that are home to some of the most fertile farmland in the world.

Yes, prices fluctuate, both for land and crops. But Green Street said it’s not as volatile for crops as for stocks. So think it over, said Hensley.

"Farmland competes against all assets classes," he said.

How to Buy In to Agribusiness

BY STEVE DINNEN

You want to own a farm. You maybe can’t swing the $2.13 million that it took to acquire a quarter section of prime cropland in Cass County. Plus, you worry about the liquidity of such an investment.

Fear not. For just $19.33, you can own a piece of the agribusiness pie. That’s the price of one share of Gladstone Land Corp., a publicly traded company that operates 127 farms spread across 13 states. Call your broker—hopefully being more serious than $19.33—and you have immediate ownership of a sliver of 94,000 acres of Gladstone farmland. Farmland Partners Inc. of Denver is another public farm operator. Both Farmland and Gladstone are structured as real estate investment trusts (REITs), so by law they pay 90% of their taxable income to investors each year. Current yield on Farmland (FPI: $10.70-$16.39-$13.93) is 1.48%, and at Gladstone (LAND: $19.45-$42.10-$19.33) it’s 2.96%.

LLC ownership arrangements are more common and include several in Iowa. Among them are Grainfield of Nevada (an arm of Hertz Farm Management) and Peoples Co. of Clive. Summit Agricultural Group of Alden, led by well-known agribusines leader Bruce Rastetter, has opportunities in both row crops and livestock.
Accredited investors also can link to AcreTrader, of Fayetteville, Arkansas. It has buy-ins to LLCs that operate farms for timber in Alabama, rice in Arkansas, and peanuts in Georgia.

Cash Retakes Its Crown

BY KATHERINE GREIFELD FOR BLOOMBERG

For most of modern investing history, cash has carried a connotation of indecision: Any allocation to money-market funds or Treasury bills—considered cash equivalents—was merely a way station en route to more definitive investment decisions. But with the U.S. Federal Reserve cranking interest rates ever higher, cash has become a bona fide asset class for the first time in decades.

Rates on three-month Treasury bills are hovering near 3.3%, the highest since 2008, while six-month bills yield 3.9%. The latter is above the 10-year Treasury note’s yield but with negligible duration risk—a measure of sensitivity to interest rate changes, which can be particularly destructive in extreme market environments. "Guaranteed 3-plus percent on T-bills? You have no duration, you have no credit risk—you have no risk," says Jason Bloom, Invesco’s head of fixed income, alternatives and ETF strategies. "That looks amazing right now."

Risk assets and havens alike are shuddering as a hawkish Fed attacks inflation. The central bank delivered its third consecutive 75-basis-point hike on Sept. 21, while raising projections for increases to come. Although that’s shredded returns for longer-dated fixed-income securities, it’s meant that simply holding bills to maturity and collecting interest payments—what the industry calls coupon clipping—is a reasonable strategy.

Read the rest of the story here.

Bosses Winning the Battle to Get Workers Back to the Office

BY JACK KELLY FOR FORBES

In the ongoing battle between bosses and workers over returning to the office, recent data shows more people are trudging back to the workplace.

In the first week following Labor Day, office usage in 10 major metro areas neared 50% of 2020’s pre-pandemic attendance, reports Kastle Systems, a key-card property management company that tracks entries into office buildings. There were more workers in the office last week than there have been since the pandemic started. However, in-office attendance is still lower than what it was before the virus outbreak.

The in-office numbers may be low since Kastle's data doesn’t include many of New York City's biggest real estate owners, including large law firms, banks, financial services and Wall Street firms.

Separately, the Partnership for New York City, a business industry trade group, surveyed more than 160 major Manhattan office employers between Aug. 29 and Sept. 12 to take the pulse of how many employees returned to the office or are still working remotely.

Read the rest of the story here.

NPR explains why TikTok users are debunking economists' theories that inflation is easier on Gen Zers.

Money.com explores how stocks and crypto prices are following similar patterns and what that means for investors.
CNN shares how to protect your 401(k) in a bear market.

dsmWealth is published on the first and third Thursday of each month and updated on dsmMagazine.com.

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