A Second Harvest: Privately Held Farmland and Its Portfolio Diversification Impact

This study examines the portfolio impact of privately held farmland to determine its diversification benefits within mixed asset portfolios. Using Markowitz mean-variance optimization over a 56-year period from 1969 to 2024, we analyze optimal portfolio weights under both constrained and unconstrained allocation assumptions. Our findings demonstrate that privately held farmland largely improves portfolio outcomes, with the strongest benefits emerging under constrained allocations. Farmland exhibits attractive investment characteristics, including high average annual returns, low risk, and negative to low correlations with other assets. We conclude that portfolios incorporating privately held farmland deliver superior risk-adjusted returns and higher expected returns for given risk levels.