CAIA - 20 - Farmland and Timber Investments Flashcards
There are 3 primary motivations for adding farmland investments:
- ___ ___
- ___
- Increase in value due to ___
There are 3 primary motivations for adding farmland investments:
- Inflation hedge
- Diversification
- Increase in value due to shortage
Farmland has an ___ supply, so higher prices result in ___increases in supply.
Farmland has an inelastic supply, so higher prices result in marginal increases in supply.
Farmland returns are not typically linked to financial market returns because it is ___ ___, ___and generally ___.
Farmland returns are not typically linked to financial market returns because it is privately held, subsidized and generally unlevered.
___ data is available about farmland in the U.S. than other countries.
More data is available about farmland in the U.S. than other countries.
___ institutional investment is made in European farmland.
Little institutional investment is made in European farmland.
Investment in global farmland are exposed to the following risks:
- ___
- Integration of ___and ___markets.
Investment in global farmland are exposed to the following risks:
- Expropriation
- Integration of agricultural and energy markets.
Over the past decades, farmland returns have ___ and timberland returns have ___.
Over the past decades, farmland returns have increased and timberland returns have decreased.
Three macro factors are driving the growth in demand for agricultural products:
- Global ___ growth
- Rising ___
- Increased ___-___uses
Three macro factors are driving the growth in demand for agricultural products:
- Global population growth
- Rising incomes
- Increased non-food uses
Growing demand for agricultural products needs to be met by an increased supply of:
- Agricultural ___
- Agricultural ___
- ___
Growing demand for agricultural products needs to be met by an increased supply of:
- Agricultural yields
- Agricultural infrastructure
- Land
In ___ and ___Asia, meat consumption is expected to rise, while consumption changes in ___Asia are less certain.
In east and southeast Asia, meat consumption is expected to rise, while consumption changes in South Asia are less certain.
Commonly grown products for biofuels include ___, ___oil, ___ and ___.
Commonly grown products for biofuels include sugarcane, rapeseed oil, corn and soybeans.
Production of biofuels from non-food agricultural products (has/has not) been successful.
Production of biofuels from non-food agricultural products has not been successful.
The key driver of biofuel demand has been ___ ___ ___.
The key driver of biofuel demand has been U.S. government policy.
Higher domestic consumption of corn has resulted in an increase in transportation by ___ and containerizationn of ___ ___ ___, which is a byproduct of ethanol production.
Higher domestic consumption of corn has resulted in an increase in transportation by rail and containerization of dried distillers grains, which is a byproduct of ethanol production.
There are 3 ways to make non-operating investments in agriculture:
- ___ farmland
- Owning ___ ___in agricultural firms
- Buying ___or ___
There are 3 ways to make non-operating investments in agriculture:
- Leasing farmland
- Owning listed equities in agricultural firms
- Buying futures or derivatives
Owning farmland for lease income has the following advantages:
- Economic benefit from ___-___technologies
- Insulation from ___risks
- ___benefits
Owning farmland for lease income has the following advantages:
- Economic benefit from yield-enhancing technologies
- Insulation from counterparty risks
- Diversification benefits
The best agricultural equity index is a ___-term, ___-weighted index constructed by ___ ___.
The best agricultural equity index is a long-term, value-weighted index constructed by Ken French.
Agricultural futures are typically accessed through ___-___products.
Agricultural futures are typically accessed through index-based products.
What is the equation for crop yield?
Y = S x I x E x H
S = Solar radioation
I = Amount solar captured by crop
E = Crop’s photosynthetic efficiency
H = Harvest index (% of harvest-able dry matter)
Growth in agricultural yields, particularly in developed countries, is due to four key factors:
- Improved ___
- Improved ___
- Increasing use of ___
- Increasing use of ___ ___
Growth in agricultural yields, particularly in developed countries, is due to four key factors:
- Improved technology
- Improved agronomy
- Increasing use of inputs
- Increasing use of capital assets
Genetic advancement has contributed little to increasing yields of crops other than ___and ___. For other crops, changes in yields have largely been attained through improved ___.
Genetic advancement has contributed little to increasing yields of crops other than corn and soybeans. For other crops, changes in yields have largely been attained through improved agronomics.
Investors in farmland should structure the farmer’s economic incentives to reflect ___ ___ ___.
Investors in farmland should structure the farmer’s economic incentives to reflect multiple time horizons.
The following macroeconomic factors have the most significance in relation to farmland investment returns:
- ___
- ___ ___
- ___ ___
- ___ ___
The following macroeconomic factors have the most significance in relation to farmland investment returns:
- Inflation
- Interest rates
- Industrial production
- U.S. Dollar
Commodity spot prices (are/are not) a significant factor for determining agricultural land value.
Commodity spot prices are not a significant factor for determining agricultural land value.
The NCREIF Farmland Index has some characteristics similar to those of the NCREIF NPI:
- Only ___-___properties are included
- Investment returns are reported on a ___-___basis
- Properties must be owned by a ___-___ ___investor
- Properties are included in the ___ ___acquisition
The NCREIF Farmland Index has some characteristics similar to those of the NCREIF NPI:
- Only income-producing properties are included
- Investment returns are reported on a non-leverage basis
- Properties must be owned by a tax-exempt institutional investor
- Properties are included in the quarter after acquisition
The NCREIF Farmland Property index is divided between ___ and ___cropland.
The NCREIF Farmland Property index is divided between row and permanent cropland.
Row Cropland makes up about ___% of the NCREIF Farmland Index
Row Cropland makes up about 55% of the NCREIF Farmland Index
Permanent cropland makes up about ___% of the NCREIF Farmland Index.
Permanent cropland makes up about 45% of the NCREIF Farmland Index.
One consideration is whether institutional flows cause or lead price appreciation. Martin (2014) tests this using the ___-___ ___hypothesis test, which tests whether one time series is useful in forecasting another.
One consideration is whether institutional flows cause or lead price appreciation. Martin (2014) tests this using the Granger-causality analysis hypothesis test, which tests whether one time series is useful in forecasting another.
Results from Martin (2014) indicate that institutional flows (do/do not) lead farmland capital appreciation or income. However, farmland capital appreciation (does/does not) lead income.
Results from Martin (2014) indicate that institutional flows do not lead farmland capital appreciation or income. However, farmland capital appreciation does lead income.
___ ___ is composed of capital assets designed to enable or improve efficiency of producing, handling, and distributing agricultural commodities.
Agricultural infrastructure is composed of capital assets designed to enable or improve efficiency of producing, handling, and distributing agricultural commodities.
Agricultural Assets can be classified according to their role in four economic functions:
- ___
- ___
- ___
- ___ ___ and ___
Agricultural Assets can be classified according to their role in four economic functions:
1. Location
2. Time
3. Quality
4. Input allocation and delivery
Investors should consider 3 drivers of farmland productivity that can increase economic returns:
- ___
- ___
- ___
Investors should consider 3 drivers of farmland productivity that can increase economic returns:
1. Intensification
2. Extensification
3. Specialization
___ is using more inputs to generate greater outputs.
Intensification is using more inputs to generate greater outputs.
___ is increasing or decreasing land use as needed.
Extensification is increasing or decreasing land use as needed.
___ is using methods like mono cropping or prescribed inter-temporal crop rotation.
Specialization is using methods like mono cropping or prescribed inter-temporal crop rotation.
(On-farm storage/Off-farm storage/Both Types) are growing.
Both Types are growing.
There are 4 key reasons for the appeal of timber:
- ___ sensitivity to ___
- ___products
- Real ___ ___
- ___ ___
There are 4 key reasons for the appeal of timber:
- Low sensitivity to inflation
- Homogeneous products
- Real harvesting option
- Long duration
Timber returns have (increased/decreased) since the 1990s
Timber returns have decreased since the 1990s
Despite the advantage of higher IRRs, non-U.S. timber investing may face ___ and ___risk.
Despite the advantage of higher IRRs, non-U.S. timber investing may face currency and legal risk.
Most tree species take ___-___ years to become economically optimal for harvesting.
Most tree species take 10-20 years to become economically optimal for harvesting.
A trees’ ___ ___is the number of years for it to reach the size for economically optimal harvesting.
A trees’ rotation age is the number of years for it to reach the size for economically optimal harvesting.
In general, real assets have the following characteristics:
- I
- I
- S
- E
- L
n general, real assets have the following characteristics:
1. Inflation hedge
2. Intrinsic value
3. Scarce input
4. Economic Infrastructure
5. Long term
Investments in farmland, timber and agriculturally oriented infrastructure have ___ return expectations and ___risk profiles.
Investments in farmland, timber and agriculturally oriented infrastructure have modest return expectations and modest risk profiles.
