Good Soil, Good Water Farmland Risk Screen
Screen land, infrastructure, tenants, and legal rights before chasing returns
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 7
- Confidence
- 94%
Evaluate farmland as a layered operating system rather than undifferentiated acreage. Begin with soil quality, rainfall, aquifer recharge, and actual water access because these determine whether crops can be grown reliably. Next examine drainage, irrigation, flood exposure, transportation, storage, and the local market for tenants. Favor operators with sufficient scale, input-buying leverage, grain storage, strong finances, and modern technology, since rent is only dependable when the tenant remains viable. Finally, verify title, mineral ownership, rule of law, currency exposure, and regional regulation. The output is not merely a yes-or-no decision: the screen identifies risks that can be mitigated through capital expenditure, risks that require a lower price, and risks severe enough to reject the property.
Origin
Extracted from Masters in Business through Brandon Zick's explanation of how Ceres Partners screens farmland and operators.
Core principles
- 01Start with natural productive capacity
- 02Prefer physical water availability over paper rights
- 03Use infrastructure and tenant competition to support reliable rent
- 04Mitigate weather risk with practical capital improvements
- 05Select operators with scale, storage, and technology
- 06Demand transparent ownership and enforceable property rights
How to run it
- 1
Assess productive soil
Map soil types, quality, drainage, and variability across the property. Determine which crops and input rates the ground can economically support.
Pro tip Combine satellite mapping with physical probes and field verification.
Watch out A single average soil score can conceal low-quality sections that require different management.
- 2
Verify usable water
Confirm rainfall patterns, aquifer recharge, irrigation capacity, pumping costs, and legal access. Distinguish an enforceable paper right from water that is physically and economically available.
Pro tip Prefer regions where rainfall supplies most crop needs and irrigation is supplemental.
Watch out Water scarcity, pumping expense, or future restrictions can make otherwise productive land uneconomic.
- 3
Map environmental hazards
Evaluate flood, drought, erosion, weeds, pests, and disease exposure. Identify whether irrigation, drainage, crop rotation, or other interventions can materially control each risk.
Pro tip Price the mitigation plan before setting the acquisition ceiling.
Watch out Do not assume crop insurance eliminates persistent property-level weaknesses.
- 4
Test infrastructure and market access
Confirm that crops can be moved, stored, and sold efficiently. Examine roads, nearby buyers, grain storage, power, and irrigation infrastructure.
Pro tip Strong storage allows operators to avoid selling the entire crop at harvest.
Watch out Good soil can still generate weak economics when transport or storage is inadequate.
- 5
Measure tenant competition
Determine how many qualified farmers would bid to rent the property and which crops each could grow. A broad tenant pool supports pricing, continuity, and replacement options.
Pro tip Seek markets where ten or twenty farmers can provide credible rent indications.
Watch out Dependence on one or two operators creates concentration and renewal risk.
- 6
Underwrite the operator
Review the prospective tenant's scale, balance sheet, storage, technology, crop plan, and risk controls. Select the operator most likely to produce strong revenue and pay rent consistently.
Pro tip Favor operators using precision applications and data-driven irrigation to control input costs.
Watch out Do not mistake farming scale alone for financial strength or operational sophistication.
- 7
Verify the legal foundation
Confirm title, title insurance, mineral ownership, regulation, taxation, and enforceability. For international assets, add currency and sovereign-risk analysis.
Pro tip Use local specialists to trace severed rights and historical ownership.
Watch out A seller may not hold every right associated with the property—or, in weak jurisdictions, may not own the land at all.
In the wild
An investor compares two farms with similar yields. One depends entirely on irrigation in a water-stressed region; the other receives rain during the growing season and uses irrigation only as a supplement. After considering pumping costs, restrictions, and aquifer recharge, the investor chooses the second property even at a slightly lower headline yield.
→ The portfolio gains more resilient water economics and lower long-term regulatory exposure.
Three farmers bid to rent a corn-and-soybean property. The highest bidder lacks storage and must sell at harvest, while another has purchasing scale, grain storage, modern equipment, and a stronger balance sheet. The owner accepts the second farmer's slightly lower offer.
→ The owner improves the probability of timely rent through weak commodity cycles.
Common mistakes
Confusing water rights with water
A legal entitlement has little economic value if the source is depleted, restricted, or prohibitively expensive to pump.
Ignoring the tenant's economics
Landowner income ultimately depends on an operator who can survive input inflation, commodity cycles, and weather variability.
Generalizing across regions
Soils, rainfall, ownership history, regulation, parcel size, and tenant markets differ enough that national averages can mislead.
Is it for you?
Best for
It is best for investors comparing agricultural properties across regions, crops, water systems, and regulatory environments.
Not ideal for
It is not ideal as a substitute for local agronomic, environmental, legal, and title diligence.
From the transcript
“from a risk management standpoint, it starts with good soil, good water.”
“It's one thing to have a paper water, right, It's another to have water availability.”
“we really like title insurance, we like rule of law.”
From the episode
Ceres Partners CIO Brandon Zick on How Private Equity Invests in Farmland
Brandon Zick