Farmland’s inflation-hedging characteristics

    Manulife Investment Management
    Weiyi Zhang, Ph.D., Associate Director, Agricultural Economist

    A of different crop types’ performance in an inflationary environment.

    Key takeaways:

    • Farmland demonstrated its inflation-hedging potential by producing positive inflation-adjusted real returns over the past two years: The correlation between inflation and farmland returns remains dynamic.
    • cost categories markedly increased, but higher prices and stable output led to record-setting total U.S. farm revenue, despite high inflation.
    • Crop types are affected by inflation differently due to varied structures of production cost components: In 2022, row crops fared better than select permanent crops, with a number of market factors determining crop-specific financial performance.
    • Unlike other asset classes whose value may depreciate over time, farmland can retain its value, and with inflationary pressures forecast to ease, the outlook for farmland investors remains bright.

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