Farmland as an Asset Class: Investors, Returns and Real Effects

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• Pedro Gete (IE University)
• Thursday 08 May 2025, 13:00-14:00
• W2.01, CJBS.

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Farmland as an asset class is increasingly popular. We show that U.S. agricultural real estate prices have grown significantly faster than residential real estate prices over the last 130 years, but their growth exhibits less cross-sectional dispersion than residential real estate price growth. These results hold in multiple datasets and time sub-periods. Then, we study the California boom in tree nuts that began during the mid-2010s drought. We show that over-investment depleted groundwater. Large investors with little ex-ante exposure to nuts drive the boom. These new nut investors account for one-fifth of all agricultural well drilling in California over 2013-2023, and nut farms overall account for half of agricultural well drilling. The market as a whole overestimates the persistence of the boom, and large new nut investors are more prone to overreact to this optimism because they can expand nut supply more elastically. Overall, these findings point to significant environmental impacts of investment booms, amplified by large, optimistic newcomers.

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