Farmland as an Inflation Hedge: The Gold vs. Ground Comparison

In periods of economic uncertainty and persistent inflation, investors instinctively seek assets that preserve purchasing power. Gold has been a traditional refuge for centuries — portable, durable, and universally recognized as a store of value. But there is a compelling case that productive farmland is the superior inflation hedge, and the data supports that argument convincingly.

At Schrader's 2025 annual farmland market presentation, our president RD Schrader highlighted a comparison that Warren Buffett made in 2010 that remains as relevant today as when he first articulated it. The logic is simple, the math is persuasive, and the implications for investors are significant.

The Buffett Thought Experiment

In a 2010 interview, Buffett asked listeners to imagine a cube of gold comprising all the gold ever mined in the world. At the time, that cube would have measured roughly 67 feet on each side. Its total value was approximately $9.6 trillion.

For the same money, Buffett noted, you could instead buy all of the farmland in the United States — roughly 900 million acres — plus 10 Exxon Mobils (then the world's most profitable company), and still have about $1 trillion left over in cash.

The gold cube, Buffett observed, would sit there. You could polish it. You could admire it. But it would produce nothing. The farmland, by contrast, would generate hundreds of billions of dollars in agricultural output every year. The Exxon Mobils would pay tens of billions in annual dividends. And the trillion dollars in cash would earn interest.

A century from now, Buffett argued, the farmland will still be producing food, the companies will still be generating profits, and the gold cube will still be the same size, producing nothing. The choice, he suggested, should be obvious.

The Gold-to-Farmland Ratio

Historical data tracking the gold-to-farmland ratio — the number of ounces of gold required to buy one acre of farmland — provides an empirical lens on this comparison. Using Illinois and Iowa data from 1957 through 2021, the ratio has fluctuated dramatically but currently sits at approximately 4 to 5 ounces of gold per acre of quality Midwest farmland.

This ratio has been as high as 10 or more ounces per acre (when gold was cheap relative to land) and as low as 2 ounces (during gold price spikes). The current level suggests that farmland is neither historically cheap nor expensive relative to gold — it is in a moderate range. But the ratio misses the fundamental point of Buffett's argument: one asset produces income and the other does not.

An acre of top-quality Indiana farmland currently generates approximately $300-350 per year in cash rent income. That income stream exists regardless of what happens to the gold price, the stock market, or the broader economy. People need to eat, and the land that produces food has intrinsic productive value that no amount of gold can replicate.

Real Appreciation Over Generations

Iowa farmland data from 1941 through 2024 provides perhaps the most compelling evidence for farmland as a long-term inflation hedge. When Iowa land values are charted in both nominal and inflation-adjusted terms, the results are striking: farmland has not merely kept pace with inflation over the past 80-plus years — it has significantly outpaced it.

In nominal terms, Iowa farmland has appreciated from under $100 per acre in the early 1940s to over $10,000 per acre today — a roughly 100-fold increase. But even after adjusting for inflation, Iowa farmland has delivered substantial real appreciation, meaning landowners have not just preserved their purchasing power but meaningfully increased it.

The path has not been smooth. The farm crisis of the 1980s produced a devastating decline in both nominal and real terms. But for investors with a multi-generational time horizon — which describes most farmland owners — the long-term trajectory has been decisively upward in real terms. Land bought in virtually any decade before 2010 has appreciated well beyond the rate of inflation.

Who Is Buying Today?

If farmland is such a compelling investment, who is actually buying it? Iowa's annual buyer composition survey, which has tracked this data since the late 1980s, provides the answer.

In 2024, the buyer mix for Iowa farmland was approximately:

• 70% existing farmers — operators expanding their acreage
• 23% investors — non-operating owners purchasing farmland as an investment
• 4% new farmers — first-time agricultural buyers
• 3% other — including government, institutional, and miscellaneous buyers

Existing farmers continue to dominate the buyer pool, which makes sense — they understand the asset, they can immediately put it into production, and expanding their operation is the most direct path to increased income. But the 23% investor share is noteworthy. Nearly one in four farmland purchases in Iowa is being made by someone who is not farming the ground — they are buying it as an investment, attracted by the same fundamentals that Buffett articulated: productive assets that generate income while appreciating over time.

What This Means for Landowners

For farmland owners, the investment case for their asset has never been stronger. Farmland generates current income through cash rent, appreciates in real terms over the long run, provides a tangible inflation hedge, and benefits from structural demand drivers including population growth, renewable energy development, and a finite supply of productive acreage.

Understanding the investment perspective is also important for sellers. When you bring farmland to auction, a meaningful portion of your potential buyers are evaluating the land as an investment, not just as a farming operation. A professionally managed auction that reaches both agricultural operators and the investor community maximizes the competitive pressure on your property — and the price you ultimately receive. Reach out to Schrader to learn how we position your property to attract the full spectrum of today's farmland buyers.