The Ultimate Hard Asset: American Farmland and The 300-Year Water Supply Hidden Underneath It | Chris Morris LandFund Partners

Episode Summary

Executive Summary: Chris Morris of Land Fund Partners argues U.S. row-crop farmland is a scarce, underinstitutionalized real asset that offers diversification, inflation/geopolitical hedging, and multiple cash-flow layers. He highlights the Mid-South as a water-rich, undervalued region with strong yields, optionality, and upside from technology, renewable energy, and future water-rights pricing.

Main Topics: Farmland as an Institutional Real Asset (Priority: 5/5): Morris frames farmland as a still-niche but growing alternative asset class with low institutional ownership, low correlations to stocks and bonds, and meaningful portfolio diversification benefits. Why Land Fund Focuses on the Mid-South (Priority: 5/5): The firm targets Arkansas, Mississippi, Louisiana and nearby states because of abundant groundwater, lower per-acre prices than the Midwest, strong yields, and crop diversification. Water Scarcity and Water Rights Upside (Priority: 5/5): Water access is central to the thesis; the Mississippi Alluvial Aquifer, groundwater availability, and future pricing of water rights could materially increase land values over time. Cash Flow, Appreciation, and Optionality (Priority: 4/5): Returns come from farm rents, hunting/recreation leases, mineral and water rights, land appreciation, and option payments from solar developers, not just crop income. Technology, AI, and Yield Growth (Priority: 4/5): GPS tractors, regenerative farming, precision agriculture, and AI tools are raising farm productivity and profit per acre, which should lift rents and land values. Agricultural Policy and Risk Backstops (Priority: 4/5): Government subsidies, price-loss coverage, and crop insurance reduce downside risk for farmers, supporting land values and making farmland an asymmetric investment. Market Structure and Community Stewardship (Priority: 3/5): Land Fund positions itself as a partner to aging family owners and local operators, emphasizing fair pricing, local relationships, and avoiding the predatory optics of some housing market private equity.

Key Arguments: Farmland has low correlation to public markets, with slight negative correlation to the S&P 500 and stronger negative correlation to the NASDAQ over 30 years, making it useful diversification. The U.S. is a durable food exporter with fresh-water advantages, so farmland is a long-duration hedge against food scarcity and geopolitical risk. Mid-South farmland is undervalued relative to the Midwest: it is cheaper per acre but can produce competitive yields, creating a value-investing opportunity. Water scarcity is becoming economically important; future water-rights monetization could be an embedded upside not fully reflected in current land prices. Land can generate multiple revenue streams beyond crops, including farm rent, solar options, recreational use, and mineral/water rights. Demand for protein in developing economies increases grain demand because animal protein requires multiple units of feed grain, supporting long-run crop demand. Government support programs cap downside for farmers through price floors, insurance subsidies, and ad hoc assistance, indirectly stabilizing land cash flows. Technology and precision agriculture can increase earnings per acre even without higher commodity prices, raising the intrinsic value of farmland.

Data Points: Assets under management: over $400 million - Current farmland assets managed by Land Fund Partners Fund performance: mid-teen net returns - Described as the firm’s historical performance Evergreen fund inception: October 2021 - Soil Enrichment Fund performance comparison period Institutional farmland managers: fewer than 10 - Estimate of professional investment firms like Land Fund across the U.S. Average farmer age: 59 years old - Used to support the succession-planning thesis Correlation vs S&P 500: slight negative correlation - Long-run correlation of U.S. row crop farmland Correlation vs NASDAQ: stronger negative correlation - Long-run farmland correlation cited over 30 years Correlation vs 10-year Treasury returns: almost no correlation - Presented as notable for portfolio construction Mid-South region states: 6 states - Missouri, Kentucky, Arkansas, Tennessee, Mississippi, Louisiana Groundwater coverage: over 300 years of groundwater available - Land Fund’s estimate for the Mississippi Alluvial Aquifer region Irrigated portfolio share: 93% irrigated and growing - Share of Land Fund’s land base in the Mid-South Top-quality irrigated land price in Mid-South: $7,000 to $8,000 per acre - Approximate current pricing cited for the region High-quality Midwest land price: around $15,000 per acre - Average pricing used for comparison Record Midwest sales: close to $20,000 per acre or higher - Referenced as high-end comparable sales Corn yields in three primary states: 180 to 205 bushels per acre - Average yields for Arkansas, Mississippi, Louisiana area Irrigated Midwest corn yields: 220 to 240 bushels per acre - Comparison point used to question valuation gap Average cash rent in region: $250 per acre - Typical farmland rent in Land Fund’s area Solar lease year-one rent: about $1,400 per acre - Potential revenue from solar development leases Solar option payments: $50 to $100 per acre - Paid during 4-5 year diligence options even if lease isn’t executed Solar option duration: 4 to 5 years - Typical diligence period before execution decision Revenue CAGR: over 6% CAGR - Steady growth in average revenue per acre for the evergreen fund Annual acquisition capacity: $50 million to $100 million per year - Amount of high-quality farmland the strategy can add annually Small farm size threshold: as small as 100 acres - Minimum deal size mentioned for target acquisitions Average deal size: $4 million to $5 million per transaction - Typical transaction size for Land Fund Three main states population: 4 million households - Approximate household count in the core states Data center energy demand: 8 million households - Current known demand equivalent from data centers in the region U.N. water stress figure: 6 billion+ people - Share of the 8 billion global population living at least part of the year in water stress/scarcity Arkansas well registration fee: $10 per well per year - Fee cited for groundwater registration in Arkansas Farm subsidy floor example: $3.60 - Illustrative corn price-loss coverage reference floor Government assistance payments: $12 billion to $14 billion - Recent special additional farm support payments mentioned Crop insurance coverage: 65% to 85% of historical revenue - Range farmers can insure, with heavily subsidized premiums Target returns: mid-teen - Investor return profile Land Fund says it targets Existing investor re-up share: 30% to 40% - Approximate portion of capital from existing investors adding money

Pivotal Quotes: "We think that will look like more professional management and ownership of farmland assets, and then partnering with really great local farmers to actually operate those farms." — Chris Morris: Explaining the long-term institutionalization thesis for farmland "Farmland almost has no correlation to that, but still has a lot of the safe characteristics in terms of real asset tangible store of value." — Chris Morris: Describing farmland’s role relative to traditional safe-haven assets "So, the highest and best use for some of these farms, at least to them, is they're willing to pay a lot of money, significantly higher than the crop revenue to, if they have an operational solar farm." — Chris Morris: Discussing how solar leases can outcompete crop income on certain parcels

Implications: Listeners should view farmland as a multifaceted real asset: a diversification tool, inflation/geopolitical hedge, and potential beneficiary of water scarcity, technology, and energy transition. The sector may keep attracting capital as investors seek stable, non-correlated returns.