Genuine Farmland Indexes

With each passing day the investment community becomes more intrigued with farmland as an asset class. Farmland is now viewed as an essential commodity with concerns beyond the agricultural sphere dependent on its productive capabilities. It possesses strategic qualities similar to oil and is vitally important to the world’s economy.  To some, it’s the source of our very existence. Thomas Jefferson, the third President of the United States, said “civilization itself rests upon the soil.”  Farmland, with but a few inches of valuable topsoil, is the gold of the future.

Unlike other agricultural and natural resource products, this commodity is not yet intertwined with the financial marketplace. Access to the asset class is restrictive and complex for many. Hedging capabilities for investors and property owners are nonexistent. The needed tools to reduce risk and serve as proxy investments have not kept pace with that of other commodities.

Investing in farmland should not be as limiting or as hazardous as transacting in an undeveloped commodity. Peak Soil Indexes offers the marketplace genuine farmland indexes derived from transparent documentation. The constructs can easily be applied to new products that benefit investment and agricultural trade.

Why Farmland Indexes?

• Farmland has become an increasingly popular asset class, yet burdensome to own.

  Many investors are currently unable to take advantage of farmland's attractive investment attributes. Financial, legal, operational and other deterrents all discourage ownership.

• An investment in farmland is generally long term in nature and lacks real liquidity.

  Selling any type of property can be difficult at times; farmland is no exception. Existing private investment farmland funds are also long term commitments with little liquidity.

• Farmland has attractive asset class features; it has a low correlation to other asset classes and high correlation to inflation.

  The diversification benefits of owning farmland are compelling. It has proven to be a good inflation hedge with historical price appreciation at a rate faster than inflation. Resource depletion, climate change and an expanding population create a very favorable long term picture for farmland.

• Increased liquidity encourages participation from a broader user base.

  A lack of liquidity results in potential buyers and sellers sitting on the sidelines. New products, conceived from an accepted index can boost liquidity and deepen the participant pool.

• There are limited alternative investments to physical ownership.

  Farmland investment funds eliminate some of the hardships of physical ownership but are still long term commitments, illiquid and have increased costs. A true alternative investment vechicle with superior liquidity is lacking.

• No adequate hedging tools are available for those with market exposure.

  Property holders currently suffer all downside market risk. Non-committed capital allocations are conversely at risk to rising prices. A effective hedging tool would help manage those exposures in times of uncertainty.

• Farmland has constructive long term investment features similar to those found in other strategic commodities.

  Limited supply with an increasing population, dietary changes, climate change, etc., all suggest increased interest for the land our crops grow on.

• Tangible investments with a capped downside and liquidity are in demand.

  Investors place a priority on instruments that have liquidity and capital preservation features.

• Current farmland indexes are questionable. A legitimate index using reliable, recorded documentation derived from an objective methodology is needed.

  Survey pricing is subject to biases and at some point can prove to be problematic. Real arms length transactions remove investor doubts as to accuracy. A trustworthy index is needed for the agricultural and investment marketplace.

• Farmland indexes can be tailored to specific geographic regions and soil characteristics.

  Peak Soil can customize indexes to satisfy specific investor needs.

• A commodity with both interested buyers and sellers.

  There are strong conflicting opinions on pricing sustainability. Whie much is written on positive investment attributes, bubble concerns are now being raised.