Diversification

Investors look at farmland as a diversification away from the traditional asset classes in order to spread risk and provide a hedge against inflation. In the same way, diversification within the farmland investment itself can also be an important way of achieving the best income and capital returns, whilst also spreading risk.

Whilst an investor will want to implement an overarching investment and management model, it is also vital to take note of the individual characteristics of each farm and manage the assets accordingly. Looking at a number of the micro-factors such as land and soil quality, climate, topography and location will allow that farming business to be managed in the optimum way.

In some instances, it may be appropriate to look at whether conventional farming provides the most appropriate use of an area of land, or whether alternative land uses would be more suitable. Such examples might include using poor quality scrub land for production of short rotation coppice for use in biofuels; or using light sandy land for high-value fruit and vegetable cropping where climate and investment capabilities allow.

There are also ways of adding value to a farm’s primary production by introducing enterprises further down the supply chain, such as livestock production on the back of cereal production, or the processing and packaging of fruit and vegetables. On-farm renewable energy projects can also dramatically cut the energy costs of a farming business, whilst at the same time providing another income stream as energy is sold back to the grid. This in turn spreads the risk as it diversifies the ways in which an income can be derived from the asset.

At Mintridge International, we look at innovative ways of helping investors to achieve the best value from their farmland asset, implementing diversification projects to suit both the investor’s objectives and the specific characteristics of the farming business. In conjunction with our partners, we have specialist knowledge in high-value fruit and vegetable cropping, and in on-farm renewable energy projects.