Get the latest in farmland investing and selling farmlandSubscribe
Q: We've got a question around volatility and a good metric to track farmland volatility. That is a good one, and we wish there was a better metric.
A: There are two ways to track farmland performance. Number one is the direct way. NCREIF. That is sort of the industry standard. It's a private equity benchmarking tool to track farmland investment reports. That has been live since 1990. They put out quarterly metrics. And so that's a good way to track overall farmland investment performance. We are members of the index, we have begun contributing data to it, as well, and we're very, very excited to share that data in the coming year, externally, to show the performance of the farms on our website versus the industry standard.
The second way that a lot of people do, but we want to caution you on, is tracking the underlying commodities. So soybeans, corn as an example, they move around a lot. And I think if you look at the price of corn or soybeans in the last six months, they've gone up dramatically, like a 50% plus surge in the price of those commodities. That does not mean that we will see a 50% immediate increase in farmland.
There is some loose correlation between long term inflation of commodity prices and the rent on the farm. And so therefore, I think that is a decent leading indicator over long periods of time, again, for increases in the value of a farm—inflation is another way to say that, and a core metric. Though again, we would caution against tracking the day-to-day, month-to-month movements of commodities as an indicator of farmland.
This video is a segment of a longer introductory webinar covering farmland as an investment, how AcreTrader works, and common questions asked by new investors. You can view the webinar in its entirety, or go to the next video in the series.
Note: The information above is not intended as investment advice. Past performance is no guarantee of future results. For additional risk disclosures regarding farmland investing and the risks of investing on AcreTrader, please see individual farm offering pages as well as our terms and conditions.