If you build it, he will come.

Who can forget that classic line from the nostalgic baseball film Field of Dreams, in which an Iowa farmer named Ray Kinsella risks financial ruin to turn a valuable parcel of prime farmland into a baseball diamond. Friends and colleagues thought old Ray had lost his marbles.

I must admit, as a life-long baseball fan, I’ve also been tempted to plow down the backyard and build a field of my own (particularly if the ghost of Shoeless Joe will show up to play a few games). But then again, my home was built atop solid rock – not the fertile heartland of the nation’s corn belt.

Back when Field of Dreams was released in 1989, mid-grade Iowa farmland commanded a price of around $1,000 per acre. Today, that same land fetches an average of $11,400 per acre, according to a recent survey of farm realtors. That’s an increase of more than 1,000%. And richer, grade-A farmland sells for even more.

Soil has been a very productive asset – in more ways than one.

According to the National Council of Real Estate Investment Fiduciaries (NCREIF), farmland values have delivered annualized returns of 10.3% over the past 33 years. That compares to 8.0% for the Dow Jones. And farmland has been less than half as volatile. In fact, the worst year on record for the Farmland Index was a mild 1.0% decline, versus a 41% plunge for the Dow.

And any capital appreciation is just icing on the cake. Sure, you might walk away in the future at a higher price than you paid. But first and foremost, this is an income-producing asset class.

Investors typically don’t know the first thing about farming. So after buying the land, they immediately lease it back to experienced operators (often the prior owner). This is usually done through a sale, lease-back agreement. Here’s a textbook example.

TIAA-CREF bought 19,181 acres of sugarcane property from an outfit called Alico for $91 million ($4,700 per acre). Under the terms, former owner Alico now rents the land back under a 10-year lease for $238 per acre. Multiplying $238 times 19,181 acres means that the new buyer will collect $4.5 million in annual rental income — for a cash yield of 5% on the purchase price.

That’s more income than you’d clip from most bonds these days — and bonds don’t appreciate year after year.

More than half of the farmland in states like California and Iowa is occupied by tenant farmers who lease the land. And the rent checks are backed by whatever crops are grown.

Back in the early 1980s, there were 2.5 million farms in the United States growing some type of crop or livestock. Over the past generation, that number has dwindled to 1.9 million – meaning half a million farms have disappeared. One by one, large tracts of land once suited to the cultivation of wheat or soybeans have been paved over to erect shopping centers, doctors’ offices, and apartment complexes.

And they aren’t coming back.

According to the latest census from the US Department of Agriculture (USDA), we lost another 14,950 farms in 2024 alone. This continues a longstanding trend towards urbanization. Between 1992 and 2012, the United States lost an estimated 31 million acres of productive farmland.

That’s a landmass equivalent to the state of Mississippi.

At this rate, roughly 4,200 acres of farmland are disappearing per day, while cities grow increasingly crowded. In per-capita terms, the amount of arable farmland per person has fallen from 1.1 acres in 1960 to just 0.6 acres today.

Like any asset class, farmland values are largely influenced by supply and demand. It’s perfectly clear where the supply side of the equation is headed. But what about demand? Well, we can debate the future of some commodities like copper or oil, but there’s no denying the unwavering need for food — be it fruit, grain, or vegetable.

Food consumption is rising inexorably as the global population grows by 200,000 people per day. Put it all together, and you’ve got a strong macro argument for the steady upward march of agricultural prices.

This is usually where financial writers transition into a bullish argument for crop nutrients, which are among the few ways to invest in this sector. Fertilizers can be profitable, but also quite volatile as grain prices fluctuate.

There’s a better (and more direct) way to gain exposure. Pensions, endowments, and other “smart money” institutions have been piling into this new asset class. So have hedge fund managers — and their wealthy clientele.

I already mentioned TIAA-CREF. The giant teachers’ pension fund has gobbled up more than $8 billion in farmland (including wine vineyards) and is now the world’s largest agriculture investor. The organization is actively looking to acquire more and expecting 8% to 12% long-term returns, referring to farmland as a “store of wealth, kind of like gold.”

True, farmland and gold are both reliable hedges against inflation – but the latter doesn’t generate income.

There are plenty of other heavy-hitters attracted to the strong yields and low volatility of farmland. Harvard University’s endowment has invested nearly $1 billion in farmland from Australia to Brazil. Swiss banking giant UBS bought 9,900 acres of tillable soil in Wisconsin, followed up with the purchase of 19,200 acres in Texas and now owns around 50 properties devoted to growing vegetables, rice, apples, and other crops.

Of course, billionaires like Bill Gates, John Malone and Ted Turner have also sunk a substantial part of their net worth into farmland.

Unfortunately, the door has been locked to ordinary investors like you and me… unless you have a few million to spare and are willing to show up at deed auctions and outbid other land moguls.

But a single $100 bill can now get you 10 shares of Gladstone Land (Nasdaq: LAND) — and by extension, partial ownership of 150 farms spanning 100,000+ acres in 15 states.

For all the talk about corn, commodity crops aren’t really a focus for Gladstone. Most of its properties are located in Florida and California, not Iowa. These farms are better suited to growing products like avocados, walnuts, kiwi, olives, lettuce, and oranges.

Gladstone prioritizes land that produces fruits and vegetables over grains. These farms are typically self-sufficient and less dependent on tariffs, subsidies, and other government aid. They are also less vulnerable to drought (most are irrigated) and have more stable pricing.

As a secondary focus, Gladstone invests in farms with permanent, rather than annual crops — such as apples, almonds, blueberries, cherries and grapes. These trees, bushes, and vines only need to be planted one time, not every season. And once they reach maturity, they tend to be very productive.

Fruit and vegetable farms and orchards produce the highest revenue per acre for farmers — and thus generate the highest rents for landlords.

Gladstone’s farms are currently valued at $1.4 billion, up from just $75 million at the IPO in 2013. And with an occupancy rate of 98.7%, all but a few are producing steady rental income.

Some of these leases include “participating” agreements, meaning the landlord is also entitled to receive a fixed percentage of the farm’s gross revenues. So in addition to base rent, Gladstone also shares in the farm’s success whenever crop prices are strong. Think of it as a bonus.

Management has plowed (no pun intended) hundreds of millions into acquisitions over the years, expanding the portfolio. Operating cash flows have grown proportionately, allowing the company to raise dividend distributions 35 times in the past 40 quarters.

In response to rising borrowing costs, Gladstone has prudently slowed its acquisition activity over the past couple years. In fact, it sold seven farms last quarter, reaping a $15 million net gain. Meanwhile, some of its tenants (particularly permanent crop farms out west) have been struggling with weaker prices and rising input costs.

A few properties have been vacated, and Gladstone has worked with a couple dozen others to amend leases. This typically means reducing base rent (and even providing a cash incentive) in exchange for a higher participation percentage.

These restructurings will decrease base rents by about $17 million this year (partially offset by rising rents from other lease renewals), biting into adjusted funds from operations (AFFO). As you can see from the ugly stock chart, the market isn’t happy.

But if crop prices continue to rebound, then shareholders won’t mind Gladstone having more skin in the game as participation revenues surge over the next couple quarters. More importantly, this situation is only temporary, as these farms are expected to revert to standard base rents in 2026.

In the meantime, the stock is now trading at levels last seen nearly a decade ago. Current discount aside, there is still plenty of low-hanging fruit waiting to be plucked over the next few years. More than 60% of the nation’s farmland is still family-owned. Most owners are approaching retirement age, and the kids are often more interested in cashing out equity than taking over the family business.

I should also note that farmland is a great portfolio diversification tool, considering this asset class is negatively correlated with the S&P. The stock has been barren lately, but I expect to see green shoots soon.