The Farmland Gold Ratio - Farmland as a Lagging Inflation Hedge
The Saskatchewan farmland/gold price ratio still appears to be below its long-term average. If the ratio were to reach a similar peak to the last inflation period of the 1970’s of around 0.8 times – Saskatchewan farmland prices would have to almost double from current levels based on current gold prices.
Calgary, Canada, August 11, 2012 --(PR.com)-- In 2011, Agcapita released data on the Saskatchewan farmland/gold ratio. Agcapita is now providing an annual update of the numbers given the price movements in both assets.
The Saskatchewan farmland/gold price ratio still appears to be below its long-term average. If the ratio were to reach a similar peak to the last inflation period of the 1970’s of around 0.8 times – Saskatchewan farmland prices would have to almost double from current levels based on current gold prices.
It is interesting to note that both gold and farmland are excellent long-term inflation hedges with similar correlations to inflation. However, gold tends to be a leading inflation indicator while farmland tends to be a coincident/lagging inflation indicator. Assuming this relationship continues to hold perhaps this may represent an avenue for investors to make the “inflation trade” twice - the first time in gold then once again by rotating into farmland.
Agcapita’s series of farmland funds continue to show great appeal to conservative investors concerned with inflation and the volatility of their existing public equity investments. Farmland has similar inflation hedging qualities to gold but with an ongoing cash yield that gold lacks. Farmland returns exhibit low volatility and this combined with the high absolute returns from farmland equate to a favorable Sharpe ratio. Agcapita’s funds directly hold diversified portfolios of farmland in western Canada, and in particular in the highly price competitive province of Saskatchewan. Investors are provided with the comfort of a direct investment in farmland combined with a model of front-end loaded cash rents. Agcapita is part of a family of alternative investment funds with a focus on generating commodity-linked returns. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita is one of Canada's most experienced farmland fund managers, launching its first fund in Q1 2008.
This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words "anticipate," "expect," "may," "should" "estimate," "project," "outlook," "forecast" or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Agcapita, if any, reflect Agcapita's beliefs and assumptions based on information available at the time the statements were made (including, without limitation, that (i) the demand for agricultural commodities will continue to grow at a pace that is unlikely to be matched by growth in agricultural productivity, and (ii) investment demand for tangible assets such as agricultural commodities and farmland will continue to increase for the foreseeable future). Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of farmland, including fluctuations in interest rates, rental rates and vacancy rates; general economic conditions; local real estate markets; supply and demand for farmland; competition for available farmland; weather; crop diseases; the price of grain and other agricultural commodities; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Agcapita's undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.
The Saskatchewan farmland/gold price ratio still appears to be below its long-term average. If the ratio were to reach a similar peak to the last inflation period of the 1970’s of around 0.8 times – Saskatchewan farmland prices would have to almost double from current levels based on current gold prices.
It is interesting to note that both gold and farmland are excellent long-term inflation hedges with similar correlations to inflation. However, gold tends to be a leading inflation indicator while farmland tends to be a coincident/lagging inflation indicator. Assuming this relationship continues to hold perhaps this may represent an avenue for investors to make the “inflation trade” twice - the first time in gold then once again by rotating into farmland.
Agcapita’s series of farmland funds continue to show great appeal to conservative investors concerned with inflation and the volatility of their existing public equity investments. Farmland has similar inflation hedging qualities to gold but with an ongoing cash yield that gold lacks. Farmland returns exhibit low volatility and this combined with the high absolute returns from farmland equate to a favorable Sharpe ratio. Agcapita’s funds directly hold diversified portfolios of farmland in western Canada, and in particular in the highly price competitive province of Saskatchewan. Investors are provided with the comfort of a direct investment in farmland combined with a model of front-end loaded cash rents. Agcapita is part of a family of alternative investment funds with a focus on generating commodity-linked returns. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita is one of Canada's most experienced farmland fund managers, launching its first fund in Q1 2008.
This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words "anticipate," "expect," "may," "should" "estimate," "project," "outlook," "forecast" or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Agcapita, if any, reflect Agcapita's beliefs and assumptions based on information available at the time the statements were made (including, without limitation, that (i) the demand for agricultural commodities will continue to grow at a pace that is unlikely to be matched by growth in agricultural productivity, and (ii) investment demand for tangible assets such as agricultural commodities and farmland will continue to increase for the foreseeable future). Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of farmland, including fluctuations in interest rates, rental rates and vacancy rates; general economic conditions; local real estate markets; supply and demand for farmland; competition for available farmland; weather; crop diseases; the price of grain and other agricultural commodities; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Agcapita's undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.
Contact
Agcapita Farmland Fund
Janet Stillwell
+1 587 887 1541
www.farmlandinvestmentpartnership.com
Janet Stillwell
+1 587 887 1541
www.farmlandinvestmentpartnership.com
Contact
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