Investing in Agriculture as an Asset Class

There has been massive investment in agricultural assets including farmland, handling and trading, technology, fertilizer, and others. A number of studies have analyzed investing in farmland, but there has been limited focus on investing in non-farmland agricultural assets. This article analyzes the role of farmland and other agricultural investments in class-specific portfolios. We use a Mean-Value at Risk (M-VaR) model with restrictions to find, compare, and contrast the optimal portfolio composition among U.S. farmland, agricultural equities and grain futures. Copulas are used to account for non-normal distributions and asymmetric dependence relationships. The results illustrate that farmland is attractive as an investment. However, as risk tolerance is increased, a shift to other agricultural assets would bring greater returns.