As communities and economies are tested across the globe, examining natural resources and food production is paramount. The team at FarmTogether can help us understand the dynamics of their industry and how agriculture is more important than ever. We got together with Farmtogether Founder, Artem Milinchuk, to learn more.
Artem is no stranger to getting his hands dirty. Before FarmTogether he was the CFO/VP of Operations at Full Harvest Technologies, where they disrupted the agriculture industry with their B2B Produce platform. Combined with his years spent in the finance and ag world led him to launch his newest venture, FarmTogether, where investors have an opportunity to invest in a theme whose scarcity is growing daily alongside the world’s population.
The world population is expanding. Scientists expect that we’ll see an increase of 2.3 billion people by 2050, reaching a total of 9.7 billion inhabitants (The United Nations - The Future of Food and Agriculture, 2017). The world needs food, regardless of the state of the economy. This roughly 30% increase in the total people needing to eat will require a 70% increase in overall food production (The United Nations - The Future of Food and Agriculture, 2017). However, several studies show that yield trends are insufficient to meet future demand for global crop production.
The US is the largest & lowest-cost producer of agricultural products in the world. Infrastructure in other row crop-producing regions is underdeveloped (Brazil and Ukraine). Total agricultural output in the US nearly tripled between 1948 and 2015.
In the US alone, farmland is a $2.7 trillion market and, according to our estimates, a $9 trillion market globally (while all gold ever mined constitutes a $7.5 trillion market). Yet, investors own less than 2% of all farmland.
So you’re not a farmer or local land expert, but still want to get in the action? Well, this is where FarmTogether steps in.
“FarmTogether features direct real estate investments in farmland and fund opportunities. We typically target US row crop farmland (corn, soybeans, wheat, rice, ext.), focusing on locations with the highest crop yield productivity growth, the best relative value, and fragmented, restricted ownership. We look for properties with the potential to increase tillable acres and rental rates through drainage tile, tree or acreage removal, and pooled leasing. We also target premium crops: organics, fruits, vegetables, and nut trees.”
What variables should a newcomer consider? Seems like there is a lot of industry nuance that might be hard to decipher. How does FarmTogether help me understand and choose new investments?
“FarmTogether features direct real estate investments in farmland and fund opportunities. We typically target US row crop farmland (corn, soybeans, wheat, rice, ext.), focusing on locations with the highest crop yield productivity growth, the best relative value, and fragmented, restricted ownership. We look for properties with the potential to increase tillable acres and rental rates through drainage tile, tree or acreage removal, and pooled leasing. We also target premium crops: organics, fruits, vegetables, and nut trees.”
What types of investors is this for, and what minimums and deal terms should they expect?
We currently limit investments to accredited investors, but we’re planning to open up future deals for all types of investors.
Investments will typically be structured as interests in a special purpose entity (each, an “LLC”) that directly owns the farmland. As such, investors would be the ultimate beneficial owners of the farmland itself.
FarmTogether is revolutionizing agriculture through direct access to institutional-quality farmland, starting at $10,000. With FarmTogether, investors own a fraction of the land itself, with returns in the 8% to 15% range.
You will receive returns from farmland price appreciation at the end of the hold period. Lease payouts are typically made on a quarterly, semi-annual, or annual basis and are automatically deposited into investors’ bank accounts. The size of distributions depends on the negotiated lease payments every year. Investors can track upcoming lease payments and distributions to date through our platform.
Here’s an update on our previous offering - an Almond orchard farm in El Nido, Orange County, California. The cash yield on this investment was 13% and 5% in price appreciation.
A farmland portfolio produces returns in two ways:
By purchasing and leasing the land, we generate income from the lease payments. A second way farmland generates returns is price appreciation. Price appreciation happens when we acquire land below market when we make improvements to the land, and also through the natural long-term trends in land prices.
It sounds like a perfect match for the long-term goals of a retirement account. How do you see tax-advantaged accounts working with your platform?
“Rocket Dollar helps us easily capture Self-Directed IRA accounts, which is a very popular option for people investing in farmland and other alternative assets.”
With a great tech team, what will FarmTogether keep pushing on to improve investors’ choices?
“Our customers’ satisfaction is FarmTogether’s number one priority. We’re currently focusing on making the investment process as smooth as possible, but we have other exciting features on our product roadmap.
FarmTogether is planning to roll out a Secondary Liquidity Market Pilot in September 2020. One overwhelming piece of feedback that we have received is that some of our investors would like to have options for liquidity earlier than the end of the hold period.
Another cohort of our investors asked for longer hold periods, so we also take this feedback into account when we plan our product features.
Our team has put together a short customer walk-through video for those that are curious to see the process of investing through their Rocket Dollar Accounts, available below.”