At The Cash: with Brandon Zick, Ceres Farmland Fund(October 8, 2025)
Full transcript beneath.
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About this week’s visitor:
Brandon Zick is Chief Funding Officer of Ceres Farmland Fund (now a part of Knowledge Tree); the fund owns and manages about $2 billion in agricultural land belongings
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TRANSCRIPT:
Barry Ritholtz: Have you ever ever thought of investing in farmland? Actual belongings have turn into more and more widespread, primarily accessed by means of different investments. Like non-public fairness funds. Farmland has seen broad, non-correlated good points, and so they present little indicators of slowing down. In any case, they ain’t making any extra land.
I’m Barry Ritholtz, and on right now’s version of On the Cash, we’re gonna focus on investing in farmland. To assist us unpack all of this and what it means in your portfolio, let’s communicate with Brandon Zick. He’s Chief Funding Officer of Ceres Farmland Fund, managing about $2 billion in ag belongings. By the point you hear this, Ceres can have closed their sale to Knowledge Tree, the place they’re going proceed working as an impartial agriculture investing corporations. And full disclosure, I’m additionally an investor in CS by means of my very own private investing.
So, Brandon, let’s simply begin with a fundamental query. What makes farmland a compelling addition? To any funding portfolio in comparison with different actual property belongings.
Brandon Zick: Thanks Barry and farmland. It supplies plenty of, uh, plenty of various things that assist in a portfolio. So farmland will generate a superb quantity of revenue. Uh, it’s positively correlated with inflation and it’s additionally non-correlated with different issues in your portfolio and turns into a diversifier and it’s a capital appreciating asset. It’s not a depreciation play,
Barry Ritholtz: So yield capital appreciation. And an inflation hedge.
Brandon Zick: That’s right. Yeah. And that’s why traders have been investing in farmland for a very long time, however it’s now changing into extra, uh, broad based mostly to the general public markets.
Barry Ritholtz: So let’s discuss that historic sample. If, if there’s lease and yields, is that this probably, if. Fastened revenue substitute, do dividends receives a commission out to traders?
Brandon Zick: Yeah, that’s the best way that lots of people take a look at it. It’s uh, the annual revenue might be paid off as a dividend. So that you do see some public REITs and personal REITs which are structured that means that may power that dividend out. Uh, however you too can simply proceed to reinvest as nicely. And you’ve got that capital appreciation.
And when you assume again during the last 70 years and take a look at knowledge from the Chicago Fed, you’ll see that long-term appreciations averaged about 6% annualized, and the elements of which are actually simply inflation plus good points in productiveness. As a result of farms, these reside beasts the place they’re really rising crops yearly, and, enhancements in know-how will help crop yields and enhance the underside line, you see plenty of these advantages fall to the landowner.
Barry Ritholtz: So that you guys have scaled as much as $2 billion in farmland investing. How do you establish and supply enticing farmland alternatives? What’s the present market like?
Brandon Zick: So there’s plenty of methods to purchase farms. There are public auctions that exist. They’re very localized, and we’ll attend two to 300 of these a 12 months. However the majority of farmland is completed by means of non-public transactions. And, and these aren’t listings you don’t see on the market indicators on farms?
Barry Ritholtz: There’s no Zillow for agriculture?
Brandon Zick: Not but. A minimum of. To, uh, there are individuals making an attempt to do one thing like that, however there are, there are methods to supply farms sort of off market. And we do all of that by means of our farm tenant community. Regardless that I grew up on a household farm, we’re not working the farms ourselves, we’re renting the properties to lively household farmers. All of these farmers personal floor. They lease land from us, however they lease an actual giant preponderance of their acres from different individuals.
And people different persons are normally not institutional traders. They’re estates, trusts, non-farming heirs, individuals who, after two or three generations, will possible promote the land. And so we use our tenant community or our farmer community to attempt to supply a few of these alternatives privately.
Barry Ritholtz: You guys principally spend money on the us What areas or sectors do you discover most engaging?
Barry Ritholtz: We’re the US solely. Uh, our mandate is actually wherever. We spend money on 12 states, however about two thirds of our acres are situated in Indiana and Michigan, and virtually 90% of our acres are within the Nice Lake States. Add in Illinois, Wisconsin, Kentucky, Ohio, and Western New York. We expect that’s our candy spot as a result of there’s unbelievable marketplace for, rental with farmers. It’s extremely aggressive. It’s very top quality soils, that are nice for rising crops. We even have plenty of water sources, each underground and at rains whenever you’re making an attempt to develop a crop. And these are commodities, so low value producer winds and being nearer to the inhabitants facilities of the East coast, the place all of those crops usually transfer is a big profit as nicely.
Barry Ritholtz: You talked about inflation earlier. How does inflation and simply usually macroeconomic developments have an effect on farmland, values and investor curiosity?
Brandon Zick: Farmland is positively correlated with inflation, and that comes from a couple of in a couple of alternative ways. So, um, you recognize, clearly crop costs can enhance and you recognize, that’s one of many larger issues that may assist drive income on farms is enhance in crop costs, crop yields.
However over time, farmland has plenty of totally different makes use of. So whether or not it’s for growth or different kinds of issues, on high of simply your typical farmland, you’ll see that elevated worth over time. So even with a booming financial system, you may see farmland worth is rising as nicely, even when the precise ag manufacturing on that farm will not be rising.
Barry Ritholtz: So let’s discuss these different alternatives briefly. Mineral rights easements. You talked about looking, uh, after we have been chatting about this earlier. Um, even knowledge warehouse and ais are in search of property in these areas. How, how vital. Um, add-ons are these to fundamental worth of farms?
Brandon Zick: There’s actually two totally different teams I might put that in. You possibly can have, a few of the ancillary revenue, so like harvesting, choose timber on farms. Usually, whenever you’re shopping for a property, it’s not one hundred percent tillable. And even when it have been to be one hundred percent tillable. And rising crops, there are off seasons and also you wish to proceed to handle these properties.
We lease out farms for looking. We harvest choose timber. We like oil and fuel rights or different kinds of minerals that may be incremental. We’ve had wind generators on properties and people are all sort of incremental to your farm worth.
Then there are different issues like photo voltaic, the place you’re taking nearly all of the farm to transform it, and in that case, you’ll have a 30-year lease inflation-hedged revenue, in fact, however the revenue goes to be wherever from three to 5 instances the farm revenue. So you can be producing 15 to twenty% a 12 months in gross revenue off of your, over your value foundation for photo voltaic.
After which there are, uh, different alternatives whenever you personal actual property. Whenever you personal grime, there’s optionalities, to your level round live performance or round easements. So easements may be conservation easements, which we don’t actually do a lot of. However they can be easements for working fiber, for working energy. And there’s plenty of, um, pure fuel. There’s plenty of alternative there. After which you may see for manufacturing, you may promote properties for that, for multiples of farmland worth.
And now within the Midwest, we’re seeing an enormous demand for knowledge heart growth. And that’s wherever from 8 to twenty instances farmland worth. As a result of once they establish a website that has nice energy sources, nice water, hopefully few neighbors; It has fiber there. There’s plenty of methods to have the ability to you recognize, construct these items that then. They’re gonna be keen to pay a robust worth.
Barry Ritholtz: And this administration has been urging the, uh, house owners of those, or builders of those to focus within the us. They’re not comfy with the servers abroad, even when it’s cheaper to function.
Brandon Zick: That’s undoubtedly a problem that’s on the market, and you actually should be inside the US in areas the place there’s capability on the grid. You actually want, favorable admin or favorable authorities in all these areas to have the ability to do it as nicely.
You will note a saturation in sure spots that then they’ve to maneuver to others. So, uh, a few of the largest knowledge heart campuses within the US or outdoors of Chicago and Columbus, Ohio, you don’t see a lot new growth happening there due to lack of energy, oversaturation. So we’re seeing rather more demand in locations the place we’ve a giant footprint like Indiana, Michigan, elements of Kentucky, elements of upstate New York.
Barry Ritholtz: So what are the dangers distinctive to farmland investing? How a lot of that is local weather change and climate, water entry, and simply authorities regulation and, and NIMBYism. What, what do it’s important to take into consideration whenever you’re contemplating a dangerous enterprise.
Brandon Zick: Whenever you consider the local weather aspect, these are the normal dangers to farmland. So droughts and floods and issues like that. So we desire to spend money on areas the place you’ve got that pure rainfall, you’ve got sturdy soils, good drainage. You don’t purchase farms proper subsequent to massive rivers, as a result of they will flood.
After which as you assume over time, okay, there’s local weather change. Is there a warming taking place? Is the grain belt shifting farther north? So our place across the Nice Lakes, we expect mutes plenty of that threat.
Barry Ritholtz: In different phrases, that is an space that’s solely gonna turn into extra enticing for farming, not much less.
Brandon Zick: That’s proper. If the Nice Lakes area is working outta water, then everybody else already did. So it’s uh, it’s an fascinating dynamic. And in order that’s the place we focus our funding. However there’s farmland all throughout the US that has all various kinds of values. Other ways to handle threat.
In farmland you are able to do that by means of implementation of drainage constructions. You are able to do it by means of irrigation to strive to have the ability to have water when others don’t. So there are methods to mitigate some threat there.
To your different level about regulation. I imply the historical past of the US is agriculture, so there are plenty of areas agriculture’s inspired and, growth at all times brings strain.
So when you concentrate on what are the problems in farmland that farmers face right now, it’s growth strain, it’s labor strain. Enter value and issues that are available in. So when you’re in areas like California, the place we don’t make investments, there’s much more regulation round water, round labor that makes it harder to be an operator whenever you’re rising a commodity crop.
There are locations that we transfer away from or we don’t spend money on usually. I’m not saying we by no means would, however we haven’t but as a result of we simply don’t assume it’s a gorgeous space.
Brandon Zick: Let’s discuss California for a second. Each time I’m on the West Coast. I marvel at how native and recent the meals is. Avocados are all over the place. The tomatoes are fantastic. They’ve plenty of actually, good native crops.
However what I’m listening to from you is California is probably not a gorgeous. Um, agricultural funding space. Is that taxes, is that regulation, is that water availability? What are the challenges of farmland in California?
Brandon Zick: These native crops which are going to native markets, the produce you may get in California is second to none. I might agree with that. That’s not a scalable, giant enterprise from our standpoint. Now, whereas there are some very giant house owners of farmland that produce the California cutie oranges, the massive pistachio growers and almond growers, they’re all giant company teams that that is the one spot to develop that – the avocado. That is smart.
However from the row crop standpoint, there’s plenty of water getting used to develop crops that you just sort of have this misalignment of incentives long run round use it or lose it. Methods round water. So that you’ll see plenty of cotton and rice grown in California, which I might most likely say will not be the place you have to be rising that and utilizing that water.
We take a look at regulation, it’s coming all over the place round water, as a result of water will likely be, the following massive battle that’s on the market. Restriction is gonna come proper after regulation. As issues get restricted, we expect it’s extra prudent to be in areas the place there’s an abundance of water or an aquifer recharge, versus California the place you don’t have any new, infrastructure being constructed to seize water. No new reservoirs.
Ritholtz: What about desalination? You’d assume there’s the Pacific Ocean adjoining. They need to have all of the water they need.
Brandon Zick: Nicely for municipal that truly may make sense in some unspecified time in the future. I imply, the fee is important. The vitality prices are vital as these prices come down for the best and finest use of water municipal, that may be the appropriate reply.
And industrial agriculture is a low worth use of water. It doesn’t imply in areas like California that they don’t have senior water rights. Agriculture really does have senior water rights in elements of California and Arizona as a result of the farmers have been the primary to settle on the market.
In order that they’re really forward of cities in Arizona. Farmers are forward of cities like Phoenix by way of the place they stack
Barry Ritholtz: And therefore the water. Points in locations like New Mexico and Arizona. That’s proper.
Brandon Zick: And, then you definately simply have this, the precise local weather will not be, it’s not recharging aquifers. And when you’re not gonna construct infrastructure to, um, to make the most of when it does rain, then that’s a, that’s an space that we don’t discover a gorgeous funding alternative.
Barry Ritholtz: Let, let me ask one other, California investing. Farm and land query vineyards, are these an investible asset or is that basically a kind of self-importance venture that each one these separate vineyards are working?
Brandon Zick: That’s an fascinating query as a result of, um, you recognize, wine consumption’s gone means down. And the identical for craft beer. Individuals have moved a non-alcoholic, they’ve moved to seltzers, Excessive Noons, and so forth. So from that standpoint, it’s somewhat challenged on the macro stage
The concept of investing in vineyards. Really one in all my brothers went to Cornell and he ran vineyards in California and different elements of the nation. And he would inform you it’s simply very troublesome with labor. You will have to have the ability to promote the bottles for a really excessive worth. When you’re simply producing grapes after which promoting ’em to another person that’s promoting the retail product, that’s a troublesome enterprise to be in. So we don’t get enthusiastic about investing in vineyards.
Though in Michigan we do have one juice grape farm, and I believe Welch’s will proceed to supply grape juice for some time.
Barry Ritholtz: As a investor in farmland, how do you steadiness the 2 totally different types of, good points – annual revenue from lease and crops versus simply long-term appreciation of the underlying land?
Brandon Zick: That’s actually the advantage of farmland. If we take a look at our return sequence over time in areas of sturdy commodity costs. You are inclined to have a lot larger land appreciation after which an space in cycles. The elements of the cycle with low commodity costs, revenue includes a much bigger portion of your return.
And that prime revenue really mutes volatility over time since you’re gonna generate that 4 or 5% revenue yearly. And that may actually throughout cycles dampen the volatility you may see from adjustments in commodity costs.
Now, you’ll assume if commodity costs are altering, your rents are materially altering. All of our leases – we like multi-year leases which are negotiated sort of three years at a time. So even when commodity costs are shifting down, our rents aren’t actually shifting down, or solely a portion could be negotiated down. After which as they go up, we attempt to construct a name choice into the lease that we will profit considerably alongside the best way.
Barry Ritholtz: Ultimate query, what are probably the most vital challenges rising in farmland investing trying ahead?
Brandon Zick: I believe there’s gonna be much more competitors as a result of traditionally there actually hasn’t been a lot institutional funding on this house. Solely about 3% of US farmland is institutionally owned. And a few of that’s weighted rather more closely towards everlasting crops like vineyards or orchards, areas of the nation the place you may put bigger, greenback quantities to work. So the southeast or the west.
However I believe lots of people are figuring out farmland as a terrific asset, particularly for long run oriented traders. That is an asset you may maintain for 30, 40, 50 years with a few of that optionality round Photo voltaic, Wind, timber, even promoting into manufacturing or knowledge heart building. Infrastructure funds ought to have plenty of curiosity on this as a result of it’s a long-term asset you may pair with these long-term objectives and liabilities.
Barry Ritholtz: Actually, actually fascinating.
So to wrap up, when you’re in search of a non-correlated funding class, an alternate that’s somewhat totally different than. Multifamily or workplace house or different conventional actual property investing, take into account farmland. You get common revenue appreciation of the underlying land, and also you’re considerably hedged towards rising costs and inflation.
I’m Barry Ritholtz, you’ve been listening to On the Cash On Bloomberg Radio.
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