As pithy motivational business posters like to remind us, big ideas grow from the smallest seeds.
The metaphor is actually appropriate for Artem Milinchuk, the CEO and founder of FarmTogether. It was while he was working in finance related to the agriculture and farming sector that he first began to appreciate farmland as a potential investment opportunity.
To Artem, it was obvious that there was money to be made. FarmTogether estimates that farmland is a more than $2.5 trillion market in the U.S. alone, and as high as $9 trillion worldwide, which makes it larger than real estate and gold.
But after a little digging, Artem realized that many potential investors found the sector too confusing, not to mention geographically disparate.
Enter FarmTogether, which is helping investors of all backgrounds put their money into vetted farmland. They monitor the farm’s progress, and you get annual payments. We got Artem on a call to explain how farming works today and how it could work tomorrow, and why farmland is a more reliable investment than you might think.
The most ‘underpenetrated’ asset class
Scott: Tell me about FarmTogether and how it all works.
Artem: Absolutely. We tend to say that farmland is the oldest asset class, but yet it’s one of the most underpenetrated today, which is kind of fascinating! Farming sometimes can be seen as a volatile, low-margin business. And yes, farms can be high risk, but overall, farmland as an asset class has returned historically about 10 or 11 percent, and with volatility of less than 7 percent.
The idea behind FarmTogether is that we want to open this very exciting but safe asset class to a large audience, to a lot of different investors. We want to open it up to retail investors, to accredited investors, and also make it accessible to institutions. A lot of our institutions are struggling with low returns, especially pension funds — that’s kind of my background. I think farmland can solve at least part of that problem for retirees.
At the same time, what got me really excited about farmland as an investor is that it’s so untapped: it’s a massive, massive market. It’s $2.5 trillion in the United States, it’s $9 trillion globally. It does the most fundamental thing that we all as humans need, which is to eat, and the amount of attention that it gets from capital is very low. And because of that, I think we’re also seeing a lot of challenges, for example, farming being in disarray in a lot of parts of the country. But I think it doesn’t need to be this fixed pie situation where I win, you lose.
For the foreseeable future, it’s still going to be boots on the ground, and smart people running this. And so our mission is to open up farmland to investors, but it’s also to help farmers make a bit more money.
We are about two years old now. We are a team of passionate individuals with backgrounds in farming, as well as broader real estate and investing. We’re here, along with Tillable and some other great companies, to help open up this asset class to more investors.
Finding tomorrow’s farmers
Scott: Tell me about the farming industry as a whole right now. What is it like?
Artem: I think what is happening is that we are going through massive shifts in the way farming is done. It’s happening on a generational level: the average age of a farmer is approaching 60, so farmers are passing on the land to the kids, and a lot of those kids don’t want to farm so they choose to lease it out to the farmers that do stay. And the farmers that do stay, they’re seeing that as everything else is becoming more competitive, both domestically and abroad, you need to sometimes run really hard to just stay in one place. They’re seeing that in order to stay competitive, you need to get bigger and smarter.
Scott: Do you feel like the generational thing has really been a bigger change agent than the big organizational farms? I wonder if it’s easy to point fingers at big organizations when actually the kids chose not to take it on and so somebody had to do it, and the opportunity became available. Where do you fall on that?
Artem: Yeah, that’s a great point. To tackle a somewhat common misconception, still to this day, 97 percent of all farmland is family owned. A lot of it is still families and it’s still a very fragmented industry. When we talk about bigger organizations, I think it always comes back to the main question, which is, look, at the end of the day, we are a market economy, and if the consumer is not willing to pay a higher price for local produce, for produce that was grown by a small farmer, then that small farmer can’t make money.
And so part of it has to come back to the consumer, and we’re seeing a lot of changes in the way consumers are choosing what to buy and from whom to buy. We’ll see hopefully supplementary changes there. But I have to agree with you that a lot of the changes are still in generational psychology. And it’s hard to blame the kids because it’s a really tough job to get up at 4:30 a.m. and go do whatever you need to do on the farm and then go to school, and go to college. Now you wake up and you can make more money having a coding job on the side, or living in a big city — that’s another big change, urbanization.
So I would say yes, mostly it’s generational. But some of the people that are smarter and wiser than me say that farming will become the new middle-class job — the new tech job or finance job — by 2030, when farms can become more automated. And so we might see some of the kids coming back. I’m seeing that occasionally: there are some acquaintances I have — they worked in New York and San Francisco for a long time and they come from farming families — and they’re coming back and taking over the family farm, implementing new techniques, they’re doing things in a more scalable way.
‘Own a little bit of America’
Scott: Rich people have made money on every dollar they’ve owned their whole lives because they could, and regular Joes have never made shit on their money. And that is why I like seeing tools like this. What do you think about the potential impact FarmTogether could have?
Artem: I think that the more we can do to help spread the wealth that’s been created in the last few years, the better. Anything that we can do to help the middle class make a bit more money on their money is great.
Later in FarmTogether’s life, I’d love to have every American own a little bit of America, so that everyone has a little bit of farm. Imagine in the future, every new American citizen, whether born or an immigrant, we could send them $10 worth of farmland and start them day one.
The great thing about farmland is that in the last 50 years, it’s something that you can invest in and forget: you buy a good cornfield, or soybean field, or an apple orchard. You have a little bit of portfolio diversity, and then in 50 years you check in on it. Look, it’s still there! The oldest farm in the U.S., I think it’s something like 373 years old, it’s in New England. And that’s the thing with farmland is that unlike even buildings and bridges, farmland doesn’t deteriorate, doesn’t change, doesn’t move; if you take care of it, it only gets better with time, with regenerative practices especially.
And so that’s why we want to get it into the hands of more people, because whatever you put your money in — even banks — you get worried about, right? You should have a diversified portfolio, but if we can get you that eight to 10 percent return which farmland has generated historically, and which we aim to get you, and that’s consistent year over year, that’s a really good return, especially in this environment of constantly falling yields and interest rates. We hope that with farmland we’ll give people something that is a little bit better than a savings account, which is very tangible and safe.