As a member of the Nebraska Agribusiness Club, I have had the great pleasure to meet Irv McQuarrie who runs the website https://www.investtuneretire.com/. We discussed investment opportunities and strategies. I asked him specifically about investment opportunities for agriculture and if he would provide his response in this blog.
Where should farmers be putting their money?
Most of us are of two minds when it comes to investing. Our left brain (that’s the rational side) thinks about safety. Our right brain (that’s the poetic side) thinks about taking a chance.
Safety has been hard to find in recent years. But after a long enough time period, it comes into better focus. Over the past 21 years, the US stock market (as measured by Vanguard’s S&P 500 Index Fund) has returned 8.8%/yr and the US bond market (as measured by the T. Rowe Price New Era Fund) has returned 5.6%/yr. Gold bullion is in between at 6.9%/yr and US savings bonds have returned 6.3%/yr (including a tax benefit worth ~1.1%/yr). If you think that the volatility of an asset is the opposite of safety, then stocks come in last and savings bonds come in first. But we live close to Omaha, and know that Berkshire Hathaway is invested in all sectors of the economy with an eye to safety. Stock in that holding company has returned 14.9% over the past 21 years. So there is a way to have your cake and eat it too!
Now for a few observations about how a farmer might take a chance with his or her investments. That part is personal: you need to go with what you understand: farmland, agronomy, irrigation, sustainability, and access to markets. Stock picking is an interesting hobby, and can be rewarding if you do a lot of research on companies that make products (or provide services) that you know about. But keep in mind that food is priced on the basis of worldwide supply and demand for agricultural commodities. Stock in those companies, which facilitate food production or place products in grocery stores or restaurants, will be volatile. I can only think of 4 stocks that are reasonable to hold (and keep adding to) over the long term: Coca-Cola, PepsiCo, Wal-Mart, and General Mills.