Farm Business

[rswfarms]

For you guys wondering if farmland has been a better investment than the SP500 Stock Index, below is a short example comparing the two between 1960 to 2009. Sorry that this research paper by Iowa State University hasn't been updated since 2009, but between 2009 and 2012, Iowa farmland has increased by over 100% so the comparison between Farmland and the SP500 would favor farmland by even a much higher amount. It is good to know that us farmland investors have made a good choice by investing our money in farmland rather than the stock market. Below is a short example/comparison:

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Comparing the stock market and Iowa land values: A question of timing

Figure 1 shows the return to $1,000 invested in 1960. At that time, $1,000 would have purchased 3.83 acres or 17.6 shares of the S&P. Using the assumptions above, an investor at the end of 2009 would have 32.87 acres worth approximately $143,672, or they would have 75.58 shares of the Standard and Poor’s worth approximately $83,805. In other words, the value of the S&P investment would be only 58 percent of the value of the land investment.

There have been periods since 1960 when the returns to the stock market have been higher. However, for the most part, land has shown higher returns over the past 49 years. It is interesting to note the recent dramatic swings in the S&P, as shown in Figure 1.

Figure 2 shows what would have happened if the $1,000 investment in land or the S&P had been made in 1970. At that time $1,000 would purchase 2.39 acres or 11.1 shares of the S&P. By 2009, the land investment would have been worth $58,456, while the S&P investment would have been worth $39,029. An investment made in the S&P in 1970 would be 67 percent of the value of an investment in land.