TIP477: Recession Proof Your Portfolio With Farmland w/ Artem Milinchuk

Episode Summary

Executive Summary: The episode explains why U.S. farmland is emerging as a compelling long-term asset: it has historically delivered strong, less volatile returns, acts as a hedge against inflation and recessions, and benefits from scarcity, food demand, and eventual institutional re-pricing. Artem Milenchuk discusses deal selection, crop types, climate and labor risks, tax advantages, and why Farm Together is building access for retail investors.

Main Topics: Farmland as an inflation and recession hedge (Priority: 5/5): Artem argues farmland has historically outperformed in inflationary periods and held up during recessions because food demand is durable and farmland is scarce and difficult to replicate. Why farmland belongs in a diversified portfolio (Priority: 5/5): Farmland is framed as a low-risk, low-return alternative asset that can improve portfolio Sharpe ratios and complement stocks, bonds, real estate, timber, and gold. Crop economics and return profiles (Priority: 4/5): The discussion compares raw crops, permanent crops, nuts, and fruit farms, noting that higher-margin crops usually carry higher risk, more operational complexity, and greater price/water volatility. Supply constraints: aging owners, development, and climate (Priority: 5/5): Land is becoming scarcer due to urbanization, generational turnover, and climate pressures, which may support long-term values while also changing which regions and crops are attractive. Farm Together’s underwriting and marketplace model (Priority: 4/5): Farm Together vets hundreds of opportunities, selects only a small subset, and offers retail investors access to farmland deals with tax benefits and direct ownership economics. U.S. focus and structural advantages (Priority: 4/5): Artem prefers U.S. farmland because of rule of law, infrastructure, transportation, and scalability, while Canada and Australia are the only other markets he sees as comparably secure. Financialization and future market structure (Priority: 3/5): He expects farmland to become more financialized over time, with secondary markets and more financing products, though greater liquidity may increase volatility.

Key Arguments: Farmland is a strong hedge against inflation because agricultural output is tied to real goods and food is embedded in CPI inputs. Farmland has historically performed well in recessions and market crashes, making it attractive as a stabilizing portfolio asset. The asset class is scarce: land cannot be easily created, and U.S. farmland acreage is shrinking due to development and other pressures. Illiquidity currently dampens farmland volatility; as secondary markets emerge, returns may become more market-like and more volatile. Higher-margin crops such as almonds, apples, pistachios, and other tree nuts can deliver stronger returns, but they also introduce more operational and climate risk. U.S. farmland is preferred because of strong property rights, transport infrastructure, large scale, and a deep but fragmented owner base. Farm Together screens hundreds of farms and uses technology-assisted underwriting to avoid weak deals and surface only attractive opportunities. Farmland can provide tax advantages through pass-through structures and depreciation of improvements like trees, wells, and trellises. Institutional capital is expected to enter the space more meaningfully over time, potentially repricing the market upward. Vertical farming has a role in niche categories like leafy greens and herbs, but it is unlikely to replace large-scale land-based agriculture in the near term.

Data Points: Annual return of farmland index: 11.2% - Approximate 25-year annual return ending March 2021, cited as outperforming the S&P 500 over the same period. Annual return of S&P 500: 9.6% - Used as the comparison benchmark for farmland performance over the same 25-year period. Farmland volatility vs. equities: Roughly half as volatile - Trey notes the S&P 500 had about twice the volatility of farmland. U.S. farmland acreage: 900 million acres - Artem uses this figure to show how tiny Bill Gates’ acreage is relative to the total market. Bill Gates farmland ownership: ~230,000-270,000 acres - Referenced as the largest private farmland ownership position, held directly or through entities/foundation. Food waste: One-third of food - Artem cites global food waste as a major systems problem and a motivation for Full Harvest. Potential food security impact of reduced waste: A quarter less waste could feed all hungry people - Artem argues that lowering waste meaningfully could address hunger. U.S. farmland ownership by families: 98% - He says most U.S. land by acreage and number of farms is still family-owned and highly fragmented. U.S. farmland in rental arrangements: 40% - A significant share of land is rented, especially in individual-to-individual arrangements. Farmland value as real estate market: About $3 trillion - Artem compares farmland to the size of the U.S. housing markets, saying it is the third largest real estate market. Single-family housing market: Tens of trillions - Used as a comparison to show farmland is large but smaller than single-family housing. Multi-family housing market: About $3 trillion - Used alongside farmland to illustrate the scale of farmland as a real estate class. Historical share of workforce in farming: ~70% 150 years ago - Shows how labor moved away from farming over time due to technological progress. Current farming workforce share: 1.4% by 2020 - Used to highlight agricultural productivity gains and broader economic development. Farmland lost to development: More than 11 million acres over 20 years - Artem cites farmland conversion as a major supply-side constraint. Potential future turnover of U.S. farmland: 70%+ in the next 20 years - He says aging owners and succession issues will cause major ownership turnover. Typical target return for raw crops: 6%-8% total return net of fees - Described as a stable, low-risk profile for annual row crops like corn and soybeans. Current farmland yields: Around 1.5%-2% - Artem says yields are on the lower end recently due to rising land prices. Minimum investment on Farm Together: $15,000 - Retail investor entry point for platform deals. Investor screening volume: Hundreds of farms - Artem says the firm reviews hundreds of opportunities for each platform deal. Land depreciation: None for the land itself - He notes IRS rules do not allow land depreciation, though improvements may be depreciable.

Pivotal Quotes: "Farmland, I think most people don't realize how good Iran has had in the last 20, 25 years." — Artem Milenchuk: He is making the case that farmland has strong historical performance that many investors overlook. "The only other country that I think, like two countries, that we're looking at in terms of that think give similar level of safety is Canada and Australia." — Artem Milenchuk: Explaining why Farm Together focuses primarily on U.S. farmland for long-term investing. "There are elements of inflation-linked bonds in farmland. There are elements of real estate, there are elements of timber, elements of gold as well." — Artem Milenchuk: He summarizes farmland’s hybrid role in portfolio construction.

Implications: Listeners should view farmland as a durable, income-producing real asset with inflation protection and diversification benefits. The sector may become more institutional and financialized, but U.S. farmland still offers a fragmented, potentially attractive entry point for long-term investors.