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.
A physical investment in farmland is a long-term commitment with questionable 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.
Demand is universally expected to increase.
Farmland has attractive investment features; it has a low correlation to other asset classes and high correlation to inflation.
The diversification benefits of owning farmland are compelling for many investors. Past performance has shown the investment to be a good inflation hedge with price appreciation often exceeding the rate of inflation. Resource depletion, climate change and an expanding population create what many consider a favorable long term environment for appreciation.
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 alternatives to physical ownership. All lack liquidity.
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.
A track record of being a superior inflation hedge than gold and other commodities.
Current farmland indexes are questionable. A legitimate synthetic index that can serve as a spot price.
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 land quality.
Peak Soil can customize indexes to satisfy specific investor needs.
A commodity with both interested buyers and sellers. A bullish and bearish case for investing can often be made at the same time.
Divergent opinions exist regarding the future needs for arable land. While much is written about farmland’s positive investment attributes, there exists an equally plausible belief that technology will drastically reduce the amount of land required for sustainability. Such diverse opinions suggest significantly increased volatility for crop and farmland prices.
Benchmark farmland indexes provide the foundation for product development beyond ETFs, such as futures and options.
Benchmark status signifies PSI indexes as the authoritative market price for farmland. Building credible farm management tools and products can best be accomplished from an irrefutable pricing source.