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Betting (on) the farm

Gates’ purchase of farmland in North Dakota initially raised concerns because of a Depression-era law that prohibits corporations and limited liability companies from owning farmland in the region.

North Dakota’s Agriculture Commissioner Doug Goehring previously told KFYR-TV — a television station in Bismarck, North Dakota — that many people weren’t thrilled about the news.

“I’ve gotten a big earful on this from clear across the state, it’s not even from that neighborhood. Those people are upset, but there are others that are just livid about this,” Geohring said.

However, the anti-corporate farming law does allow individual trusts to own farmland if it is leased to farmers — and that’s what Gates’ firm plans to do.

On Wednesday, North Dakota’s Attorney General issued a letter saying that the purchase complied with the law.

A recession-resistant asset

You don’t need an MBA to see the appeal of farmland.

Markets can go up or down, but no matter what happens, people still need to eat.

That makes farmland intrinsically valuable.

And it just so happens that Gates’ good pal Warren Buffett also likes the asset.

In fact, Buffett bought a 400-acre farm in Nebraska back in 1986. “I needed no unusual knowledge or intelligence to conclude that the investment had no downside and potentially had substantial upside,” Buffett later wrote.

At Berkshire’s annual shareholders meeting earlier this year, Buffett mentioned farmland again as one of the two assets he’d buy instead of Bitcoin.

“If you said, for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon,” he said.

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No need to be a billionaire

While the ultra-rich have been acquiring farmland, you don’t need to be a billionaire to get a piece of the action.

Publicly traded real estate investment trusts — that specialize in owning farms — allow you to do it with as little money as you’re willing to spend. You don’t need to know how to work the farm, either — just sit back, relax, and enjoy the dividend checks rolling in.

Gladstone Land (LAND), for instance, owns 164 farms totaling 113,000 acres. It pays monthly distributions of $0.0454 per share, giving the stock an annual dividend yield of 2.5%.

Then there’s Farmland Partners (FPI), a REIT with a farmland portfolio of 185,000 acres and an annual dividend yield of 1.8%.

If you are looking for options outside the stock market, there are investing services that allow you to invest in farmland as well.

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About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.