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The setup in farmland
I’ve been discussing the ‘inflation trade’ a lot on this blog. The RINF ETF (30yr inflation expectations) made a 6yr breakout earlier this year, then consolidated for 6 months, and now looks to be starting the next leg higher.
How does one profit from rising inflation? The popular method is to own commodities like oil, ags, and materials.
But something that isn’t talked about much is farmland, which is surprising given its current setup. I first tweeted about farmland a couple weeks ago, but feel a blog post does it better justice. Let’s explore.
Compared to the S&P 500, farmland has produced higher return with lower volatility over the past 20 years. And with a negative correlation!
Specically, from 2001-2020:
S&P 500: 9% avg annual return, 18% standard deviation
NCREIF Farmland Index: 12% avg annual return, 8% standard deviation
20yr correlation: -21%
Unlike gold & bitcoin, arable land has been decreasing in supply, is vital to soceity, and generates income.
An easy, liquid way to get exposure to farmland is through a REIT such as LAND. This particular REIT owns 153 farms with over 100,000 total acres in 14 states. Here’s a good presentation for more info on it: Link
Let’s look at the technicals.
LAND has gained +61% YTD, and is a momentum leader along with ETFs such as XLE and KRE.
LAND Monthly. Beautiful 7yr base breakout last year followed by a strong uptrend.
LAND Weekly. False breakdown. Remember, “from failed moves can come fast moves in the opposite direction.” The line shown below allows us to manage our downside risk.
With inflation running, farmland is an asset that deserves consideration. Especially given the strong momentum, 7yr base breakout, and low correlation with stocks. To top it all off, hardly anyone is talking about this asset. 🤫
Important Disclaimer: This blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.