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29 January 2025

(Understanding) Farmland Investment Dynamics

In his short story ‘How Much Land Does a Man Need?’ Leo Tolstoy explores the dangers of unchecked ambition and the importance of prioritising the good of the people in a tale about land ownership.

The same question is indeed still relevant today - how much land does mankind actually need? According to McKinsey Research, by 2030 an additional 70 to 80 million hectares of arable land will be required, leading to increased competition for suitable land.

In this paper, against the backdrop of Tolstoy’s prose, we will discuss the motivation, risks and rewards of investing in farmland. With the global demand for food, livestock and power sources fuelling the desire for land, Tolstoy’s story reminds us to find a balance between the demand for land and the protection of natural capital, which is a crucial challenge for a sustainable future.

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Disclaimer
Van Lanschot Kempen Investment Management (VLK IM) is licensed as a manager of various UCITS and AIFs and
authorised to provide investment services and as such is subject to supervision by the Netherlands Authority for the Financial Markets. This document is for information purposes only and provides insufficient information for an investment decision. This document does not contain investment advice, no investment recommendation, no research, or an invitation to buy or sell any financial instruments, and should not be interpreted as such. The opinions expressed in this document are our opinions and views as of such date only. These may be subject to change at any given time, without prior notice.

General risks to take into account when investing in farmland
economic downturns and market fluctuations can significantly reduce returns and affect rental income, property values, and dividend payments. Environmental, social, and governance events can negatively impact investment value and overall risk. Farmland is not a liquid asset class, and external factors may also affect the liquidity of individual farms. Tenant defaults can affect returns and working capital. Currency exchange rates can impact the asset values. Government-related risks, including taxation and legislation, can affect financial performance and investment returns.

Il y a un dicton en néerlandais, Kom verder, qui ui signifie beaucoup de choses, et c'est notre philosophie d'entreprise. Il reflète la façon dont nous travaillons avec nos clients, mais aussi la manière dont nous dirigeons nos entreprises participantes pour créer de la valeur pour les actionnaires grâce à un engagement actif.

Risque de perte en capital. La valeur des investissements et des revenus qui en découlent peut évoluer à la hausse comme à la baisse. Les investisseurs sont susceptibles de ne pas récupérer l’intégralité de leur investissement initial. Les performances passées ne présagent pas des performances futures et ne sont pas constantes dans le temps.