Farmland: The Red Thread – Alternatives

In an era marked by economic uncertainty, shifting global trade dynamics, and the search for resilient asset classes, US farmland is often viewed as an attractive investment consideration. With a market value estimated at over USD 2.2 trillion and more than two million farms across the US, farmland represents a large and relatively underexplored asset class. Farmland in the US is not a monolithic entity but a diverse landscape encompassing annual and permanent crops, spanning regions from the Corn Belt to the Pacific West. The Pacific West (California), is recognized for its agricultural diversity, producing a wide array of commodity crops, vegetables and permanent cropland such as orchards and vineyards. This diversity is considered a factor that may contribute to the adaptability of US agriculture, enabling it to respond to changing market conditions and global demand trends.

US agriculture benefits from a robust ecosystem of technological innovation and capital investment. The sector is supported by land grant colleges, agricultural extension programs, and a culture of innovation among farmers. Biotechnology, advanced machinery and conservation practices have contributed to improvements in productivity and sustainability. The US farm economy is generally well-capitalized, which has enabled investment in infrastructure and technology over time. The US has one of the largest contiguous cropland areas globally, situated in latitudes considered favorable for crop production. California’s farm economy is significant, with output that exceeds entire countries such as Australia. The nation’s central location between major export markets in Europe, Asia, Mexico, and Canada provides strategic advantages for agricultural trade. A network of infrastructure supports commodity movement, including major rivers like the Mississippi, Ohio and Columbia, which facilitate transportation. Extensive railroads, highways, and port facilities in cities such as New Orleans, Portland, Houston, Los Angeles and Baltimore enable access to domestic and international markets.

The US is recognized as a leading producer of agricultural commodities, with a broad range of exports. Rising global incomes, especially in developing countries, and the growth of alternative fuels like ethanol and biodiesel have influenced demand for US farm products. Despite challenges such as tariffs, US agricultural exports were reported at USD 175 billion in 2024. The USDA projects exports could reach approximately USD 217 billion by 2034,¹ based on assumptions about global GDP expansion and rising incomes, particularly in developing economies. These factors are expected to affect demand for food and agricultural commodities, though outcomes will depend on economic conditions and trade policies. The US continues to play a major role in supplying agricultural products to global markets.

Farmland is currently a relatively low-penetration asset class compared to other alternatives. As of December 2024, institutional managers account for approximately 0.8% of the investable farmland universe, compared to around 12% for commercial real estate. The total market value of US farmland is estimated at USD 2.2 trillion, yet institutional ownership remains a fraction of this, highlighting substantial room for growth. UBS Farmland Investors have a long-standing history in US farmland investment management. Originating from the Agricultural Investment Division of Connecticut Mutual Life Insurance Company in 1983, the team has evolved through several milestones, including being among the first managers to oversee farmland on behalf of pensions in 1989, contributing to the creation of the NCREIF Farmland Index in 1991, and being acquired by UBS in 1999. As of 2025, UBS Farmland Investors manages approximately USD 2.5 billion in assets, reflecting decades of expertise and leadership in the sector.

US farmland has historically delivered strong total returns over a 55-year period, with positive returns in 52 out of 55 years between 1970 and 2024.² The asset class offers diversification benefits for traditional stock and bond portfolios, historically serving as a hedge against inflation and providing stable income. Farmland’s risk-adjusted returns, as measured by the Sharpe Ratio, surpass those of other major asset classes, including stocks, bonds, commercial real estate and timber. Annual total returns for US farmland have averaged around 10%, with income returns in the 4%–6% range.² Income has remained steady across market cycles, while appreciation has contributed to long-term capital growth in the past. The stability of income returns is notable, offering investors relatively consistent cash flow even during periods of economic volatility.

Farmland has historically demonstrated its value as an inflation hedge, especially during periods of high inflation and negative returns in other asset classes. In 2022, for example, both stocks and bonds posted negative returns amid inflation above 6%, yet farmland delivered positive performance. This resilience has been associated with the asset’s ability to generate income and appreciate in value, even as broader markets face headwinds. Annual cropland produces commodities such as corn, soybeans, wheat, cotton, rice, potatoes and fresh vegetables. These crops are planted and harvested each year, offering some flexibility to adapt to changing market conditions. Permanent cropland includes orchards and vineyards producing fruits and nuts on trees or vines. Investments in permanent cropland have provided exposure to both the land and the biological assets (trees or vines), as well as supporting infrastructure. While permanent crops can offer higher income returns over time, they are less flexible in responding to market shifts and often involve greater operational risk, as they are frequently owner-operated.

We were among the first firms to invest in farmland on behalf of pension funds, beginning in 1989. Our experience in US agricultural real estate, however, dates back to the early 1970s. Today, we are one of the leading managers of institutional farmland investment portfolios in the US.

Historically, Farmland has delivered strong long-term returns with relatively low volatility and has shown a positive correlation to inflation and other asset classes.

Annual returns 1970-2024

Farmland’s attractive return profile has stood the test of time, delivering investors strong risk-adjusted returns to investors across many market cycles. This reputation was tested as recently as 2022, when US inflation exceeded 6% and both bond and equity markets were deeply negative – a scenario not seen since the 1970s. During that period, Farmland generated once again positive returns and remained largely uncorrelated when investors needed it most.

Farmland sector performance outlook¹

¹ USDA as of February 2025.
² UBS Asset Management, Global Real Assets, Research & Strategy research based on data obtained from the Bureau of Labor Statistics, St.Louis Fed, the Bar-Cap Aggregate Bond Index, EAFE International Stock Index, S&P 500 Stock Index, IA SBBI US Small Stock Index, NAREIT, NCREIF Property Index and Core Farmland Index as of 31 December 2024. Source of CPI: Bureau of Labor Statistics. CPI is the Consumer Price Index, an inflationary indicator of the standard of living in the US. It is also referred to as the “cost of living” index. Means are annualized returns consistent with methodology used by NCREIF and are as of December 2024. Standard Deviation and Correlations are based on December ending annual returns. Past performance is not an indication of future results and the possibility of loss does exist. The Core Farmland Index does not include fund-level management or other fees or fund-level expenses, is not available for investment and is for illustrative purposes only.