Investing in Agriculture as an Asset Class

There has been massive investment in agricultural assets including farmland, handling and trading, technology, fertilizer, and others. A number of studies have analyzed investing in farmland, but there has been limited focus on investing in non‐farmland agricultural assets. This article analyzes the role of farmland and other agricultural investments in class‐specific portfolios. We use a Mean‐Value at Risk (M‐VaR) model with restrictions to find, compare, and contrast the optimal portfolio composition among U.S. farmland, agricultural equities and grain futures. Copulas are used to account for non‐normal distributions and asymmetric dependence relationships. The results illustrate that farmland is attractive as an investment. However, as risk tolerance is increased, a shift to other agricultural assets would bring greater returns.