You’re probably here because you love ETFs and index investing and have heard people talking about how great farmland is so you want a farmland ETF or agriculture ETF. You want to be investing in farmland to hedge against inflation and recessions.
Well, it’s a great match, indexes, and farms. You don’t know how to run a farm and you have a trading platform (if you don’t I rank the best trading platforms).
Management companies are the answer to your life’s problems. So let’s dive in to see who’s the best and how it all shakes out.
What is an agriculture ETF?
An agriculture ETF (exchange-traded fund) is a fund that invests in companies that produce agricultural products or agricultural commodities and assets. It’s a great way to get a foot in the door if you’re not quite well-versed in agriculture and don’t plan to own a farm.
What is a farmland ETF?
Similarly, a farmland ETF is a fund that invests in companies that own farmland for whatever purpose.
The farmland can be pretty much anything, livestock, produce, grains, nuts, whatever if you eat it counts.
Timberland doesn’t count though, not that you would eat the wood. (I do not condone termites reading this article).
Why buy an agriculture ETF or farmland ETF?
Well, farmland and agriculture generally have good returns, are relatively stable, and are a great way to fight inflation. That’s why you should buy into farmland but ETFs are a special attack method.
ETFs have higher liquidity than direct farm ownership, meaning that they can be easily bought and sold. Essentially, your investment won’t necessarily be tied up for too long and you’d most probably be able to free up some funds if you need to (in many ways this is actually a negative as you can see in crowdfunding vs ETFs).
Another bonus is that there’s a lower barrier to entry. This is primarily because of the fact that you get to buy shares in the fund, which are usually quite tiny. That’s as opposed to having to cough up a lump sum to buy a whole multi-million dollar farm to get a piece of the agriculture or farmland pie.
How to buy an agriculture ETF or farmland ETF
Buying an agriculture ETF or farmland ETF is quite similar to buying regular stocks. So, if you have stock trading platform, then you’re good to go.
If you don’t it’s easy to get into. Stock investing can be easy for beginners.
After that, all you need is the 3-4 letter ticker name and you’re investing.
Agriculture and farmland ETFs vs. farmland crowdfunding
I want to make a special callout between crowdfunding, direct farm ownership and ETF investing.
They are 4 ways to get a piece of this pie.
- A farmland ETF offers a lot of liquidity, and is easy to get into but lacks some upsides (crowdfunding vs ETFs always have some differences).
- A farmland REIT but then you are walking into the world of individual stock trading (with its headaches) and still missing the upsides ETFs suffer from.
- Owning a farm is the most direct way to get into farming. Plus it gives the biggest recession proofing and inflation proofing benefits with its rock-solid financials.
But owning a farm sounds like an extra job and a hard one at that. Plus most people don’t know a hogshead from a sow’s head (I think that makes sense, I never want to own a farm, I would go broke).
- Lastly, farmland crowdfunding is a relatively newer way of investing in farmland. Now you can directly buy a piece of a farm but have it be managed by another company. Like getting an Uber, but you are buying an object instead of a ride.
It’s actually amazing as it gets around the massive knowledge gap and lump sum that typically stopped people from owning a farm, while still keeping those direct ownership benefits.
Top 3 farmland and agriculture ETFs
1. iPath Series B Bloomberg Agriculture Subindex Total Return ETN (JJA)
- Holdings: Futures contract indexes of corn, soybeans, sugar, wheat, soybean oil, coffee, and cotton
- Inception date: 17/01/2018
- Dividend yield: 0%
- Historical return: 12.8%/yr (2018-2022)
- Market Cap: $25.92M
- Expense Ratio: 0.45%
This fund is a little funny in that it doesn’t really own anything other than futures contracts, which are weird. The upside though is that it tracks all agricultural future contracts instead of just 1 type of product.
While futures contracts do move up and down with agriculture prices they don’t fill my spirit of owning a farm being a source of stability in a recession.
The way they describe it is that this fund takes on a commodities-focused approach and “seeks returns linked to the performance of the Bloomberg Agriculture Subindex Total ReturnSM.”
Also worth noting is that it is an ETN instead of an ETF so it is a note index, instead of a fund index. This has tax implications that your investing platform can figure out for you. Just know that it can have some.
Why did it make the list: JJA is really only included because people talk about it and I wanted to point out that I don’t recommend it 🙂
2. Invesco DB Agriculture Fund (DBA)
- Holdings: 10 agriculture futures contract indexes
- Inception date: 01/05/2007
- Dividend yield: 0%
- Historical return: -1%/yr (2007-2022)
- Market Cap: $1.94B
- Expense Ratio: 0.93%
More futures contracts! But it holds more types of contracts than JJA. Mainly it’s including livestock!
But it still has all the negatives that JJA has.
Why did it make the list: DBA is is the biggest agriculture index around! I still don’t recommend the futures contracts routes though. Plus it has all those sticky tax issues JJA has.
3. Teucrium Agricultural Fund (TAGS)
- Holdings: 4 Teucrium Commodity Funds, Sugar, Corn, Soybean and Wheat.
- Inception date: 28/03/2012
- Dividend yield: 0%
- Historical return: -3.7%/yr (2012-2022)
- Market Cap: $30M
- Expense Ratio: 0.21%
TAGS is the only real ETF that’s in the agriculture space. It follows the prices of the main farmable good in the US (corn, soy, wheat, sugar).
Have the returns been great? No.
Why did it make the list? It is actually an ETF in agriculture.
My top recommendation
TAGS is the big winner of the group but that’s not saying much. It’s just at least tracking the price of farmable goods so it can be a stand-in as our index investing path.
However, owning something like a corn index doesn’t really offer up the stability that owning a corn farm does. Corn farms produce corn and sell it for a profit (semi) regardless of what the price of corn is or what the futures contracts are charging.
So in the end I recommend AcreTrader, (do your own research though…I have to say that) which is a simple crowdfunding way to own farms and do almost no work. You get inflation-proofing and recession-proofing effects from owning farms as well as a management team to take care of the ins and outs, just ending with you getting a tax slip and profit.
TL;DR – Farmland ETF (and Agriculture ETF)
- Farmland is a great way to protect yourself from inflation and recessions.
- ETFs and index investing are great as a whole but when it comes to farmland there aren’t really any great choices in ETFs
- There are some ETF choices out there but in the end crowdfunding a farm is the best way to get the real benefits of farmland investing.