Inflation Risks and the Potential Hedge Provided by Timberland and Farmland Investments

Inflation Risks and the Potential Hedge Provided by Timberland and Farmland Investments

5 April 2023

Over the past three decades, inflation has remained relatively muted in developed markets.

However, recent trends indicate a growing inflationary risk that threatens the stability of investment portfolios. In June 2022, the U.S. consumer price index (CPI) recorded an 8.6% year-over-year increase – the largest in 40 years and significantly surpassing the Federal Reserve's 2% target. Heightened inflation risk undermines the real rate of return on investments, prompting investors to re-evaluate and reposition their portfolios.

In this article, Gwen Busby, PhD, Head of Research and Strategy at Nuveen Natural Capital, examines the potential of timberland and farmland investments to serve as effective hedges against inflation.

The Land Group