Investing in farmland has long been used as an effective tool to build diversity into institutional investment portfolios, historical performance of farmland as an asset is impressive; Market research conducted by Knight Frank Agricultural in October 2009 offers a forecast indicating UK farmland values will double by 2016.

It is sound fundamentals that drive this growth, as less farmland comes available for cultivation, and more food crops are diverted to produce biofuels. At the same time, the global population is expanding, which is widening the gap in supply and demand substantially; demand for wheat has outweighed supply for seven of the last eight years. As any asset is short supply and high demand, farmland provides the ideal environment for a stable and sustainable growth investment, whilst at the same time enjoying an exceptional income yield.

The problem with farmland investment for smaller investors has always been centered around accessibility, as the majority of major players in the farmland investment business require a minimum of $50 million dollars, and concentrate only on sourcing large deals for investment funds. So the smaller investor has always been naturally prohibited form investing in farmland.

Now however we are starting to see innovative farmland investment packages aimed at retail investors with capital of between £25,000 and £5 million.

Due now to the establishment of a number of managed investment schemes, for the first time investors can acquire farmland without having to commit millions of pounds of capital, and they can enjoy net income yields of up to 10% through leasing the land back to the selling farmer, or operating the land through a farming proxy on a crop share arrangement.

According to figures from the Royal Institute of Chartered Surveyors (RICS), actual real growth rates for UK farmland have been 9.8% as an annual average over the last ten years, 13.5% over the last half-decade, and over the last three years UK farmland has increased in value at a rate of 18.1% per year. UK farmland has more than doubled in value over the last seven years and most industry experts are projecting a similar performance over the next seven.