The past 15 years have brought two developments that have changed the dynamic for farmland investment. The financial crisis of 2008 gave a renewed focus for institutional investment in farmland as an alternative asset. Coincidentally, bitcoin, the first cryptocurrency, was founded around the same time in 2009.
Here are four key ways the two assets compare.
1. They are both rare.
As Steve Bruere from Peoples Company points out, only 1% to 2% of farmland turns over each year.
“I always tell people there are two types of people in the world. People who own farmland; and people who wish they did,” Bruere says.
Mike Rohlfsen is a consultant who co-founded Agris Academy to help farmers think differently about grain marketing, and as a fan of cryptocurrency himself, he also regularly gives presentations explaining the opportunities with cryptocurrency.
“For example, you can think of
bitcoin like digital gold because it has natural scarcity. There will never be more than 21 million bitcoins,” Rohlfsen says.
2. The two investments are on different ends of the risk spectrum.
Bruere says for investors, owning farmland provides an asset positively correlated with inflation. As inflation goes up, so do farmland values. And farmland values are negatively correlated with public equities.
He says cryptocurrency, such as bitcoin, and farmland as alternative investments are complementary—not competitive. While cryptocurrencies are still perceived as a higher risk, farmland carries a long-standing performance curve.
“They used to compare farmland with gold, but it was said it was gold with a coupon because it had a dividend yield,” Bruere says. “Now, crypto is the modern gold, but you can call farmland crypto with a coupon because it allows investors to store wealth, be inflation-protected and have an annual cash yield, which you don’t get from crypto or gold.”
Bruere also believes as the interest in the general crypto market increases, it broadens the overall pool of
investors who are thinking about alternative assets.
“Cryptocurrency may increase interest in farmland,” he says.
3. Tokenization.
The cryptocurrency market has different platforms, such as Solana and Ethereum, that enable tokenization — using a fractional ownership structure on the blockchain.
“The concept where you can buy fractional pieces of a bitcoin can also apply to farmland,” Bruere says. “It would cost $3.2 million for 160 acres at $20,000 per acre. Fractionalizing that in a way with crypto opens up a new way we are able to think about farmland ownership.”
Rohlfsen says as farmland ownership interest increases, it could help to satisfy an increasing appetite for the asset without an increase in supply by providing greater access to investors at smaller, more affordable parcels.
“You’ve seen it play out in fine art where someone purchases 1/1,000 of an art piece through tokenization. And it’s gotten traction,” Rohlfsen says. “If you broke up a 160-acre parcel, you could allow someone to buy it 1 acre at a time.”
4. The time for transformation coincides with a generational change and a technology advancement.
“We are entering a time where there will be a massive wealth transfer from baby boomers who are looking for alternative investments and ways to allocate capital,” Bruere says. “That demographic shift of where the wealth is will mean more interest in alternative investments.”
The shift of where that wealth is being held, who is holding it and with what expectations is happening in parallel with the blockchain and cryptocurrency technology.
“What this leads to is disintermediation. Blockchain allows anyone to transact freely and openly, and consensually without a lawyer, bank or middle layer. We can expect the increased digitization of anything transactional,” Rohlfsen says. TP
