Jay Girotto – Farmland Opportunity (First Meeting, EP.10)

Regulatory Issues

Regulatory challenges in farmland investment are significant, with potential impacts on operations and profitability. Jay Girotto highlights the Obama-era Waters of the United States (WOTUS) Act as a major concern, which proposed changes to what constitutes a body of water, potentially affecting farming practices like fertilizer application and tillage 1. This regulation, if implemented, could have required permits for temporary water bodies, complicating farming operations.

Regulations coming out of Washington. Certainly the biggest issue that has been put out there in the last decade was the Obama era proposed change to the waters of the United States.

--- Jay Girotto

The uncertainty surrounding such regulations, along with trade wars, has created volatility in commodity and land markets, impacting farm incomes significantly 1.

   

Economic Risks

Economic risks in farmland investment include scenarios of inflation and deflation, which can significantly impact returns. Jay Girotto identifies two macro risks: a deflationary environment or high inflation without corresponding high interest rates, both detrimental to farmland investments 2. He explains that while high inflation with high interest rates can benefit farmland, akin to the 1970s, the opposite scenarios pose challenges.

If you do have a high inflationary environment with high interest rates, that works well for farmland.

--- Jay Girotto

Additionally, Girotto advises careful examination of deal sourcing and return expectations, emphasizing realistic high single-digit returns over the long term, rather than attempting to time the market 3.