Farmland has one of the best pitches in all of alternative investing: it’s a real, productive asset that people need regardless of what the stock market is doing, it tends to hold its value during inflationary stretches, and unlike an office building, nobody is going to stop needing food. The pitch is largely true. The problem is that the return an investor actually captures through a fund often looks very different from the return the underlying land is generating, and that gap is the part most marketing materials skip over.
Start with the land itself. According to a recent review of USDA and Farm Credit Canada data, U.S. cropland values rose 4.7% in 2025 while Canadian farmland values climbed 10.4% over roughly the same period — solid, inflation-beating appreciation by almost any measure. But the NCREIF Total Farmland Index, the benchmark institutions use to track fund-level performance in this space, returned just 0.20% in 2025. That’s not a typo, and it’s not a one-off. Fund structures carry management fees, leverage costs, operating expenses on the underlying farms, and cash drag from properties that aren’t fully leased or cropped in a given year — all of which eat into the gap between what the dirt is worth and what an investor’s statement shows.
Three Very Different Ways In
Publicly traded farmland REITs are the most liquid option, trading with daily pricing like any other stock. Farmland Partners (FPI) is the most recognizable name in the space and posted roughly 23% share price appreciation year-to-date as of its most recent quarter, well ahead of the broader market over the same stretch — though a single strong stretch for one REIT says more about that company’s specific portfolio and leasing decisions than about the asset class broadly.
Private farmland funds and platforms sit in the middle. Firms like FarmTogether pool investor capital to buy specific parcels or diversified baskets of cropland, typically advertising return targets in the 6% to 13% range with quarterly distributions, often paired with tax-advantaged structures for retirement accounts. These platforms usually require accredited-investor status and carry the same illiquidity that any private real asset fund does — there’s no exchange to sell into if an investor needs cash unexpectedly.
A newer variation worth knowing about is loan-based agricultural investing, where the investor isn’t buying land at all but is instead funding loans to farm operators and collecting interest — a structure some platforms offer with minimums as low as a few hundred dollars. That’s a meaningfully different risk than owning land outright: the investor has credit exposure to the borrower rather than ownership of an appreciating asset, and the return profile looks more like private credit than real estate.
The Return Comes From Two Places, and They Don't Move Together
Historically, farmland’s overall return has been split fairly evenly between land appreciation and income from leasing or crop-share arrangements — over long stretches, the combination has produced average annual returns in the low-to-mid teens, according to data compiled across multiple industry reviews. But those two components respond to very different forces. Land values are driven by long-term factors: population growth, the amount of arable land available, and broad inflation expectations. Income from a given year’s crop is driven by weather, commodity prices, and input costs, all of which can swing sharply from one growing season to the next. A drought year or a bad commodity cycle can produce a real income shortfall even while the underlying land value continues to rise, which is exactly the kind of divergence that shows up in weak fund-level numbers like the ones NCREIF reported for 2025.
The Risks That Don't Show Up in the Pitch Deck
Weather and crop disease are the obvious risks, but the less obvious one is tenant risk. Most farmland funds don’t farm the land themselves — they lease it to operators, and those operators’ ability to pay rent depends on their own crop yields and commodity prices in a given year. A fund’s income can suffer even when the land itself performs exactly as expected, simply because the farmer leasing it had a rough season. Concentration by crop type and geography matters too: a fund heavily weighted toward a single commodity or region carries meaningfully more volatility than one diversified across crop types and climate zones, even though both would be marketed under the same “farmland” label.
For an investor thinking about a real assets sleeve, farmland is worth taking seriously as a genuine diversifier — it doesn’t move in step with stocks, bonds, or even most other alternatives, and the long-run case for land as an inflation hedge holds up historically. But the honest framing is that this is a patient, income-plus-appreciation asset with real year-to-year variability in the income piece, not a smooth, bond-like substitute.
Timberland Runs on a Different Clock Than Cropland
Timberland deserves a separate mention within this category, because its return dynamics behave differently from row-crop farmland in one important way: a standing forest is a form of inventory that keeps growing in value simply by continuing to exist. Unlike a field of corn that has to be harvested and sold within its growing season, timber that isn’t harvested in a weak-price year can simply keep growing, and the landowner can wait for better prices before cutting. That flexibility gives timberland funds a natural buffer against commodity price swings that row-crop farmland doesn’t have, though it comes with its own risks — wildfire, pest infestation, and the multi-decade time horizon required for many timber species to reach harvestable maturity, which makes timberland even less liquid than farmland in most fund structures.
Sizing the Position Honestly
Given the gap between headline land-appreciation figures and what actually shows up in fund-level returns, the most useful exercise before investing is asking a fund sponsor directly for its trailing five-year cash distribution history, separate from any reported total return figure that includes unrealized appreciation. A fund that has consistently delivered a modest but steady 3% to 4% cash yield on top of long-term land appreciation is offering something structurally different — and arguably more honest — than one whose marketing leads with a blended double-digit total return figure that depends heavily on land values continuing to climb at recent rates. Anyone evaluating a specific fund should ask directly what portion of the advertised return has actually been realized as cash distributions versus land appreciation that only becomes real money when the fund eventually sells.
