February 15, 2024

By Lynda Kiernan-Stone, Global AgInvesting Media

U.S. farmland investment company Source Agriculture (Source Ag.) is currently raising up to $75 million to fund its goal of bringing to bear its vision and new approach to farmland investing.

The process started in November 2023, when the company engaged counsel and began its filing of a REG A+ offering with the Securities and Exchange Commission. The REG A+ structure was established in 2015 as a means to provide a more cost-effective way for companies to raise capital as opposed to the daunting requirements under the Exchange Act when selling public securities. They function much as an IPO would, however, they offer a greater level of flexibility on the types of investors allowed to purchase such securities, and limit the company to raising a maximum of $75 million in a 12-month period. 

Once qualified by the SEC under this REG A+ framework, Source Ag. stated it will be able to accept investments from both accredited and non-accredited investors, allowing for a much broader pool of available capital. 

“Source chose a REG A as we believe that the opportunity to participate in this investment should not just be limited to people with a certain net worth but should be available to everyone regardless of income,” stated the company.

From the beginning, Source Ag. stated that for each farm acquisition it examines, the challenges of the future will be a key consideration before adding an asset to its portfolio – citing how some traditional U.S. farmland REITs contain farmland in regions that are in danger of running out of water, are made unsuitable for carbon credits due to farmers unwilling to adopt sustainable production practices, or are not suitable for wind or solar project integration. 

But the many benefits of farmland as an asset class are proving it to be a wide-reaching solution to many of today’s most critical issues.

~ Farmland historically has outperformed the S&P 500, Nasdaq, Gold, Real Estate and Timber.

Farmland investor FarmTogether addressed this in an article published by GAI News in June 2023, stating,

“Despite the challenges posed by the global pandemic and other economic events, farmland as an asset class has shown remarkable resilience. In 2022, the NCREIF Farmland Index outperformed most major assets by a significant margin; farmland offered returns of over 9 percent, while real estate returned just 5.5 percent, the S&P 500 Total Return Index returned -18.1 percent, and the Barclays Aggregate Bond Index returned -13 percent.”

“This stability extends far beyond the past few years – farmland has experienced net positive growth each year since 1992, averaging 10.71 percent in total annual returns. This outpaces real estate at 8.39 percent, equities at 9.58 percent, and bonds at 4.74 percent, according to research by our firm using index data from above. Farmland’s stability can be attributed to strong commodity markets and stable land values; average cropland values are currently sitting at a record $5,050 per acre, up 14 percent from 2021.”

Zeroing in on high-value farmland investment opportunities, Source Ag. stated it will forge long-term, triple-net leases with tenant farmers, and intends to also boost value and drive revenue by leasing land to renewable energy projects such as solar or wind farms to create new revenue streams. Aside from leases, other sources of value generation will be achieved through appreciation, revenues, and carbon credit markets.

Source Ag. also highlighted how farmland investment is:

~ A mitigating force against climate change though carbon capture and the shift toward sustainable farming practices. 

~ A channel through which to invest in water, calling it the “new oil of our century”. 

~ Farmland is the site for some of the U.S.’ largest renewable energy projects through large-scale solar and wind installations. 

~ Farmland is one of the best hedges against inflation.

~ And is integral to biofuel production. 

Indeed, underscoring this theme, this year’s National Farmland Market Overview report, released by Peoples Company and authored by Bruce Sherrick, professor and director, TIAA Center for Farmland Research, University of Illinois, expressed how farmland has shown a resiliency based on its positive correlation with inflation, low or negative correlation with publicly traded equities, annual income, and long-term appreciation, making its power as a portfolio diversifier stronger than ever.

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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