As salary earners or business owners, the importance of investment cannot be underestimated or overemphasized. And while there are numerous investment opportunities, we’d be looking at how to invest in agriculture.
“Save me today and I will save you tomorrow” mantra is one of the most popular financial or money quotes you’d hear out there. However, this quote isn’t suggesting that you only save, but that you make your savings work for you – by investing them.
And like we said earlier, agriculture has become one of the most viable ways of investing, and with its very promising ROI, we’d discuss how to invest in agriculture.
It’s important that one invests his or her savings, because, of what importance is your money lying low without interest?. When you can send it forth to yield returns.
However, the confusion or question many people would ask is “what do I invest in? This article answers all your concerns and more about investing in farming. Stay with me!
Table of contents
Introduction
Everything we eat and drink, what we wear, and even the house we live in, all connect to agricultural products.
With this in mind – the understanding that we can’t do without agricultural activities; it’s no surprise why the agricultural prospect has risen in recent times.
Investors are now turning to agriculture more than ever before. Because they now understand that agricultural investment is a very specific business that requires special knowledge and utmost practical experience.
Moreso, with the global challenge to feed more people with less land, as well as significant increases in land value, investing in farming can seem like a good strategic move. It would also appear to come off as an interesting opportunity to hedge one’s investment portfolio against inflation.
Agricultural investments make investment more friendly and work out a strategy and investment vehicle that fits the specific needs either of private or institutional investors. Before a person makes up his mind to be involved in an agricultural investment he needs to ask these questions.
- What Is Investment/Agriculture?
2. Is investing in agriculture a good idea? Answer this and give reasons why one should invest in agriculture.
3. What are the pros and cons of agricultural investment?
4. Which agriculture business is most profitable? And finally,
5. List and explain how to invest in agriculture for a high ROI in 2023.
What Then Is Investment/Agriculture?
We could say that Investment is the change in fixed inputs used in a production process. A simpler definition would be that investment is the change in the physical capital stock – physical inputs that have a useful life of one year or longer.
This could be in form of land, equipment, machinery, storage facilities, or livestock.
Meanwhile, agriculture is the science or practice of farming. This includes; cultivation of the soil for the growing of crops. It also involves the rearing of animals to provide food, wool, and other products.
Is Investment In Agriculture A Good Idea?
There so many ways a person can either save or use his capital and these include investments in the stock market, investing in real estate, and even saving up money in a retirement fund but right to say that agricultural investment comes highly recommendable because it offers a beneficial opportunity from growing ones wealth over a long term.
Agricultural investment is a long term wealth building investment and when compared to other types of investments like saving bonds or certificate of deposit, it is safer and even appreciates in value unlike those which will likely end up as a nominal loss due to the corrosive power of inflation which shrinks the value of the currency.
Experts say agriculture is a low-risk investment that keeps pace with inflation and increases in value over the long term.
They describe investment in agriculture as a tangible asset that provides benefits to the community.
Experts have also said that agricultural investments can guarantee significant revenue for the investor.
Additionally, depending on the investment and the type of farm, investors can profit in many different ways.
As is true of all land-related developments, a person asset does not depreciate with time – this can not be said about properties such as a building structure, etc.
Because, with time, the quality of the building structure deteriorates. and the owner has to spend substantial amounts of money, to maintain it.
Investing in agricultural land, not only saves you from spending all that money but also leaves you with an option to use the land for varying purposes in the future, within the boundaries of the law.
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What Are The Pros and Cons Of Agricultural Investment
It is not new knowledge that for everything that has benefits and advantages there are by the side some disadvantages. But here, the advantages are numerous that one may not take cognizance of the disadvantages, and a list of these include:
- Agricultural investment is an Effective Inflation Counter
- Investment In agriculture is a Stable Income-producing asset.
- Agricultural Investment Delivers Lower-income Fluctuation
- Agricultural Investment Delivers Total High Returns
- Investment gives better explanations that help understand the connected aspects of food.
- Encourages efficiency and expertise that can bring about more effective and intelligent use of resources.
- Makes available opportunities for economic advancement for developing economies.
- An agricultural investment makes available resources for research by larger industries.
- Availability of resources for specialized research by larger industries.
- It allows for the production of inexpensive goods.
However, on the disadvantages side, an agricultural investment that is not totally free from downs faces bottlenecks which include:
- Encouragement of the privatization of public resources both currently and formally. Eg. extension services p.
- Gives small portions of certain groups access to so much power over public policies and other standards.
- While driving forward the midterm economic opportunities, traditional and alternative values are neglected.
- So much rush into specialization causes the loss of generalists.
- When the creation of a wider breadth for economic activities goes wrong, it leads to big fail scenarios.
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Which Agricultural Business Is Most Profitable?
It has been observed that once there is a mention of agriculture or agricultural investment, a person’s mind naturally goes to cultivating and harvesting crops on farmlands.
Therefore, it is important to know that while cultivating and planting on farmlands is part of agriculture, there are so many other activities.
They include livestock farming just as cultivating on the land which falls under the crop farming category.
The agricultural sector has been proven to be one of the major contributors to the world’s GDP as the sector feeds billions of people every day.
According to the data from the World Bank, aside from the actual farm operations, agricultural business or agribusiness refers to the production and distribution of agricultural products which includes farm equipment and supplies, machines, and other farm-related services.
There are many agriculture businesses one can invest in for good profits and some of them are.
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#1. Vertical farming with a market value of $3.9 billion.
This is the type of farming solution for developed areas, it is a system of producing fresh products in developed areas that is more sustainable and faster than the normally known farming methods.
#2. Precision Farming with the Market value of $7 billion.
Precision Farming. This type of farming that forms into a whole, solutions that can be gotten from information technology so that crops and soil will be given the necessaries to grow and produce at their best.
#3. Apiculture With The Market Value: $8.3 billion
This has to do with bee farming and because there’s a rise in demand for honey and other products that come from this farming, and in addition to the scarcity of natural honey, commercial beekeeping farms have sprung up all over the world. There is an ongoing awareness that sugar-based sweetness has a negative effect on health and this has driven a growing demand for natural honey.
#4. Vegan Food with the Market value: $14.4 billion.
There has been an increased demand for vegan food globally and this is because of the constant increase of the awareness of consumers in food and ingredients consumption.
Other Ways of making money through agriculture includes:
- Mushroom farming
- Selling of fertilizer
- Sale of farm machinery
- Sale of Organic fruits
- Poultry farming etc.
Among all mentioned agricultural investments anyone could venture into, analysts say that poultry farming is the most profitable.
This is because of the numerous products that come out of a poultry farm which either separately or together can generate a lot of funds.
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How To Invest In Agriculture For A High ROI in 2023.
Return on investment (ROI) is a financial ratio used to calculate the profit an investor will receive as returns from their investment cost. It is usually measured as net income divided by the original capital cost of the investment. The higher the ratio, the greater the benefit earned.
It has also been observed that the higher the ROI, the higher risks of such investment.
When a person decides to go with an agricultural investment that will have a high ROI, he must have the stages of the agricultural process which are the Suppliers, crop growers and distributors in mind.
These groups contribute to the overall agricultural process. They are directly involved and are very important in yielding crops, and the investor has to recognize how they work together. This will helps investors pinpoint opportunities and issues in the market.
The investor has to know that the agricultural sector requires many agribusinesses outside of the production process to deliver products. These companies generate much of their revenue indirectly from agriculture.
Different commodities like potash and livestock can all be considered separately when making investment choices. This is because different conditions and statics are considered in these choices.Tracking the performance of these commodities can help investors gauge the health of the market.
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Ways to invest in agriculture:
Investment vehicles
Once an investor has taken the decision on which part of the agricultural value chain to invest in, he will need to choose how to do it. Vehicles like futures, stocks and exchange-traded funds are all popular options.
The futures market is the tried-and-true method of the three and offers an easy way for investors to play price changes in agricultural commodities. Futures contracts may be a bit overwhelming for starters and suggest that those interested in going this route should study historical price movements and learn about the market.
Once a person develops an interest in investing in agricultural stocks, there are faced with plenty of choices. These Investors can consider companies ranging from smaller niche service providers to large, consolidated companies with global reach.
There is also an option to invest in ETFs. These Agricultural ETFs are usually either made of agricultural stocks or a collection of future contracts that have specific commodities. They are a strong and better option as they help lower investment risks.
Conclusion
Often the idea of investment sounds interesting until it’s time to decide where to invest.
Investment in agriculture has stood the test of time. It is one of the surest investments. And, this article explains all you need to know about investment in Agriculture or how to invest in agriculture.
References:
- Fao.com
- Abggmbh.com
- Harvestreturns.com
- Housing.com
- AmInsidemonkeybarvalley.com
- Investingnews.com
- Punchng.com
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