2011, Volume 14, Paper 87

The other side of the fence: How does agriculture stack up as an investment?

Mike Carroll – Agribusiness adviser, company director and primary producer

A lot of farmers that I talk to suspect that the grass is greener on the other side of the fence, and that
perhaps they’d have been better off selling the farm and putting all their money into shares. So what
I’ve endeavoured to do in this analysis is look at whether this is true or a false perception.

In working through my analysis I hope that it helps you to consider, on a more informed basis,
whether you should start diversifying your investments by allocating more of your capital off farm or
perhaps retiring from farming altogether and allocating all of your capital to non-farm investments. At
the very least it will help you appreciate the opportunity cost of the equity you have invested in the
farm.

There are no unqualified answers to these questions. The answer depends very much on your
individual circumstances and you’ll have to make some big assumptions about what the future holds.
When it comes to predicting what commodity prices, farm property values, interest rates and share
market returns will do, no one knows and you should treat any oracles with suspicion. In what I’m
presenting I’ve relied on past performance, which I think is a good a predictor as any, but beware
history doesn’t necessarily repeat itself.

Download the full PDF version here.