Is farmland an inflation hedge? The owners of Farmland Partners Inc. (NYSE:FPI) probably think so.
Unfortunately for them, it’s not working out right now as the real estate investment trust (REIT) dropped from $16.25 in April to its current price of $12.59. That’s a 22.5% loss in just five months — more than the inflation rate, annualized or otherwise.
Farmland Partners owns what it describes as “high-quality North American farmland” and provides loans to farmers secured by farm real estate.
The company owns about 155,000 acres in 16 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota and Virginia.
Farmland Partners oversees 26 crop types and has more than 100 tenants.
An insider recently bought stock in the company: Thomas Heneghan, a director of the firm, picked up 708 shares. The purchases were made at $14.10 per share, on Sept. 23. That’s not that many shares when you consider that his total ownership of Farmland Partners now comes to 1,335,383 shares.
The REIT pays a 1.86% dividend.
Here’s the daily price chart for Farmland Partners Inc.:
This week, the REIT undercut its June and July lows at just above the $13.25 level, a previous area of buying support. With that level violated, sellers clearly have taken control, which is not a good sign. It may be a positive sign that buyers showed up on Sept. 27 at the $12.25 area and that the relative strength indicator (RSI), below the chart, is now signaling oversold.
See also: This Little Known REIT Has Produced Double-Digit Annual Returns For The Past Five Years
For a slightly longer-term view, here’s the weekly price chart for Farmland Partners:
The picture here is gloomier as both the relative strength indicator and the moving average convergence/divergence indicator are showing negative divergences in regard to price. If Farmland Properties continues to sell off, it looks as if the next level of support might be the Jan. 22 low of $10.50.
Interest rate hikes made by the Federal Reserve are felt in this sector as it’s likely fewer loans will be made because of higher mortgage rates. Underlying property values might stop rising as fewer purchases of farmland become the expectation.
Read next: New Farmland Investment Offering For 390-Acre Forage Crop Farm In Idaho
Charts courtesy of StockCharts