The Great Recession could have been a turning point in the potential of farmland as an asset class. Yes, the 1970s were important, too. And so were the 1980s, although fraught with struggle.
But it was the country’s financial crisis in the second half of the 2000s that ignited investors’ interest in farmland, according to Steve Bruere, president of Peoples Company, a Des Moines, Iowa-based full-service agricultural land transaction firm.
“When you look back at the factors that were driving that in 2008, you had the financial crisis,” Bruere said, “Folks were getting hurt in commercial real estate, residential real estate, the stock market…and you could feel it in our business where folks were looking for alternative places to put their capital.”
Bruere grew up on his family farm in Warren County, Iowa. He thinks that the Great Recession – and the frustration with falling returns on the stock market -- transformed farmland as a more appealing opportunity to people who weren’t geographically familiar with agriculture’s potential like his family was.
RELATED: You can find Peoples Company President Steve Bruere’s personal and professional biography here.
When stock values cratered, farmland interest soared. Bruere said, “Places that they felt were a safe haven where you weren’t going to lose 50% of the value overnight. And people started to really look at farmland.”
“Folks that historically had never liked farmland, never owned farmland. And then all of a sudden, they’re wanting to deploy capital into it.”
Peoples Company and University of Illinois at Urbana-Champaign Agricultural and Consumer Economics Instructor Ailie Elmore released a white paper called “The Evolution of Farmland as an Institutional Asset.”
RANDOM READ: This article explains the origins of the term “white paper” from a century ago in British government.
“The Evolution of Farmland as an Institutional Asset” traces farmland’s values over the past half century and significant events that impacted those values. Here is how it describes investors’ curiosity toward farmland’s future as financial markets struggled:
“…the U.S. stock market lost roughly $7.4 trillion, or around $66,200 per household, from 2008 to 2009. Virtually every industry was affected in some way and on December 16th, 2008, the Federal Reserve slashed short term interest rates to 0% for the first time in an effort to spur lending activity. Still feeling the effect of the housing crash and with many banks struggling financially, banks continued to reduce their level of lending and more expensive long-term rates discouraged businesses from financing expansionary projects.”
The white paper also looks at how the Soviet Union/Russia played a role in U.S. agriculture.
1970s – Soviet Union’s drought triggered increased demand in American commodity exports.
1980s – Soviet Union’s invasion of Afghanistan led to President Jimmy Carter’s grain embargo toward that country. That was one of the factors that strained American farmers.
2020s – Russia’s invasion of Ukraine disrupted global agriculture, fertilizer, and energy industries.
RELATED: “Food as the ‘Silent Weapon’: Russia’s Gains and Ukraine’s Losses” by the Center for Strategic & International Studies looks at the global enormity Russia’s attack on Ukraine has had. Read that here.
