Farmland Investment Risks: What Could Go Wrong?

Weather and Climate Risk

Drought, flooding, hail, and other weather events can devastate crop production and income. Climate change is shifting growing patterns and increasing extreme weather frequency in many regions.

Commodity Price Risk

Farm income depends on commodity prices, which are volatile. A sustained drop in corn or soybean prices would reduce rental income and potentially farmland values.

Interest Rate Risk

Higher interest rates reduce the present value of farmland cash flows and make financing more expensive. The rate environment directly impacts what buyers can afford to pay.

Regulatory Risk

Changes in environmental regulations, water rights, foreign ownership restrictions, and agricultural subsidies can all affect farmland values and returns.

Liquidity Risk

Farmland typically takes 3-12 months to sell. In a downturn, marketing times extend and discounts from asking price increase. This is a significant consideration for investors who may need to access capital.