Why Is Bill Gates Buying So Much Farmland?

Farmland: The biggest investment opportunity of the decade.

May 29, 2021 by Artem Milinchuk 


CANOLA A GMO CROP
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Bill Gates’ interest in farmland has stoked interest from an array of investors who are always on the lookout for the next big opportunity. Many wonder why Bill Gates is buying so much farmland and how they can follow suit.

Gates’ investment in farmland gained attention when he and now-ex-wife Melinda became the largest investors in private farmland across the country back in January 2021. The two now own 269,000 acres of farmland across 19 states through one of their investment firms (although Gates declined to state which one).

The potential reasons behind Gates’ farmland acquisition are broad. What we do know is the investment is largely tied to farmland’s strong financial performance. For years, farmland has been a good investment with low volatility, low correlation to the stock market, and gives investors the ability to hedge against inflation. Some other reasons are likely tied to climate initiatives, while other reasons might have to do with promoting innovation.

Profitable Investments Away From Gates’ Usual Technology

Bill Gates and other billionaires continue to place a big bet on farmland, and it’s becoming more and more evident why. Those who add farmland to their portfolios enjoy several potential benefits, including low-volatility performance, returns that rival bonds, and an asset with low correlation to market moves.

Emily Norton, director of Rural Research for the Savills real estate firm, explained why farmland is such a valuable investment.

“Land has been an attractive investment for many years, producing dependable returns for investors and owners over a long cycle, with a primary focus on delivering food, fiber and fuel to a resource-hungry world,” she said.

When you invest in farmland, you unlock investment opportunities in an asset class that expands your portfolio beyond the stock market. Farmland is an excellent hedge against market volatility, given its low-correlation with the movement of stocks and investment funds. That means when the markets move, farmland isn’t always going to follow suit. For instance, farmland investing has stayed stable even when the Dow Jones Industrial Index and S&P 500 suffered market corrections dating all the way back to the 1980s – even during recessions.





Farmland investing doesn’t just open your portfolio beyond the conventional market, it also serves as a competitive hedge against inflation. When the Consumer Product Index rises, that indicates that things like corn, oil, and precious metals are getting more expensive. When these and other commodities gain in price, the value of the land that produces these items will rise as well, which can benefit investors in these alternatives.

Lastly, farmland outperforms traditional safe-haven assets such as bonds and offers a higher-value investment opportunity than gold. Treasury bond interest rates are currently a fraction of a percent, which means investors don’t stand to gain much when their bond comes to term. Farmland, on the other hand, comes with investment opportunities that can have double-digit return rates. In fact, farmland has delivered an average return of 11% since 1992. Farmland investing is often cheaper than gold as well—another popular alternative for investors looking for market hedge. With farmland, your money can go further and accrue interest in greater amounts.

These benefits, as well as historical growth since the mid-1980s, make farmland a dependable growth opportunity for your portfolio that stays steady—even when the markets don’t.

The Desire For Profits With An Emphasis on Sustainability

Farmland is a scarce commodity these days. The amount of farmland in the United States in 2019 was an estimated 2,023,400. This represents a loss of 5,800 farms, roughly 2.1 million acres, from the year before. And yet, at the same time, global demand for food is expected to rise by anywhere from 59% to 98% by 2050 alone. With American farmland declining every year, it is crucial to preserve the ones that are still here.

Although Gates himself may not have been responsible for the investment (according to a Reddit AMA in March 2021), the reasoning behind the investment makes sense: the Bill and Melinda Gates Foundation pays a significant amount of attention and money to causes that align with farmland investing. In the AMA, Gates said this of his investment:


“The agriculture sector is important. With more productive seeds we can avoid deforestation and help Africa deal with the climate difficulty they already face. It is unclear how cheap biofuels can be but if they are cheap it can solve the aviation and truck emissions [issue].”

Farmland innovation is a crucial component of Gates’ philanthropic efforts to harness technology to solve global problems. Investing in American farms helps create and test solutions that help make farms more efficient and sustainable. According to one study, improving farmland connectivity through IoT and near-field communication technologies can help create an additional $500 billion in additional value to global gross domestic product as soon as the year 2030.
The Future of Farming Creates Opportunities

When you, institutional funds, or Bill Gates himself invest in farmland, you’re doing more than incorporating this asset into your array of holdings. You’re also making it easier for farmers to explore new agricultural technologies that can result in a more sustainable future. Innovations are making it easier for global farmers to grow crops with less water, fewer pesticides and chemicals, or even on less land.

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Not all farmers can afford to incorporate these new technm or practices, however. Cost is a major barrier for many: the average net cash farm income is expected to be $91,800 this year, which represents a decrease of just over 6% from 2020. These slim margins do not make it easy for farmers to make significant capital investments into new technology, which inhibits wide-scale adoption.

When farmers can bring on outside investors, they can access the kind of capital required to reinvest in new technologies for their farm. This makes new and more sustainable practices achievable for many farmers.
Bill Gates Is Doubling Down on Farmland Investing… And You Can Too

Farmland investing can play a significant role in your portfolio, even without being a billionaire philanthropist. While this asset has long been dominated by those with deep pockets, be they institutional investors, private equity and hedge funds, or individuals with the kind of money needed to finance the outright purchase of a farm, that’s no longer the case. Now, investors can access fractional investing in farmland—a sector long dominated by major players (and, more recently, one of the world’s richest people).
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This content is brought to you by Artem Milinchuk – Founder & CEO, FarmTogether.