Agricultural Investment and How to Make It in Agricultural Products

Finding the ideal agriculture investment may be difficult for new investors who have little to no expertise in the industry. However, there are several accessible possibilities, including:

• Agriculture investment funds
• Direct agricultural land investment
• Purchasing agricultural company equities.

In this article, there are many options to look for, providing the risks to investors, the mechanics of how each sort of agriculture investment works, and the current returns.

First, consider the importance of agriculture investment in the current economic climate.

The Present Economic Situation:

The global economy is still in disaster. There is a decrease in public spending to reduce an invalid national debt. Meanwhile, the population is expanding, and quantitative easing is likely to lead to a sustained rise. Furthermore, because of the lack of economic visibility, it is difficult to evaluate assets like stocks. As interest rates are so low, the cash deposits do not provide any actual income.

What does this mean for investors? It means that you need to buy assets having a positive correlation with inflation. This means that they go up in value quicker than the rate of inflation. These assets also generate an income to replace the income that is lost from the cash. Any of the assets that are purchased must also have a strong and assessable track record.

It is quite clear that agriculture investment, particularly investing in agricultural land, displays the characteristics of:

• Growth
• Income
• A positive correlation with inflation
• Easy to value
• Has an unblemished track record to analyze

Such agriculture investment ticks all the relevant boxes to become the ideal asset class for investors today.

Fundamentals of Agricultural Investments:

The fundamentals that are supporting agricultural investment are easy to measure. With the growth of the global population, people need more food. To produce more food for people, it is required to have agricultural land. This is the only resource for providing all the agricultural products like grains and cereals from an agricultural products supplier.

So, here is the dealing of a pretty simple matter of supply and demand: if demand rises and supply falls short, the value of the underlying asset rises. Let’s have a look at some of the major supplies and demand indicators for agriculture investment.

We have consumed more grain than we have produced for seven of the previous eight years, depleting the world storage to critical levels.

The amount of agricultural land per person has decreased by 50% since 1961. From 0.42 hectares per person down to 0.21 hectares per person in 2007.

By 2050, the global population is predicted to increase by 9 billion people.

To support that expansion, most think tanks and experts predict we would need to increase agricultural acreage by 50%, implying that a productive field the size of Greater London will need to be discovered every week.

Climate change, deterioration, and development, as well as a variety of other issues, have resulted in little or no new land being purchased for agricultural purposes in the last ten years.

As more people seek food, the underlying asset that generates our food, land, will become more valuable.

The value of agricultural land has risen when the food produced can be sold for a higher price. Making owned farmland more profitable, and food prices are at 40 years low; this leaves space for around 400% price inflation. The fundamentals supporting agricultural products investment show an excellent picture for potential investment.

Methods of Agriculture Investment:

Agriculture Investment Funds:

For funds procurement, every agricultural products trader should seek professional guidance from experienced funds providers. There are several types of agriculture investment funds to choose from, and these include:

• Invest in farming businesses
• Purely in arable land
• By stock in agricultural products businesses.

Many agricultural products’ investment funds are showing exceptional growth. It is a fact that their buying has increased the level of demand in the market. Thus, their ordinary presence is contributing to capital growth.

To return to the subject of risk, the danger associated with this fund-based investment approach is that you hand over control to a fund manager, who will spend your money on your behalf and gain assets that he or she deems relevant. If one fund performs poorly, it usually has a knock-on impact for other farm investment funds, as confidence in this particular approach declines. As a result, you may lose value for no fault of your own. You must also pay a fund management fee, which detracts from your gains.

The annual returns that can be expected from a fund vary, but most expect annual returns of roughly 10%. However, this will vary based on a variety of factors, such as fund management, investing strategy, and overall market circumstances.

Investing In Agricultural Businesses Through Stock Purchases:

Another option for cashing in on agriculture investment is to buy shares in agricultural business, be it a farming company or a services company. The options to consider are many, and careful consideration must be given to selecting a suitable market and then a suitable company in which to invest.

The business of picking shares remains in the view, only those companies with good fundamentals must be included in a portfolio, and this is a job best left to individuals with time, experience, and resources to:

• Thoroughly examine the firm
• Its management
• Its product line.

The risk is that, as with any equity-based investment, a market downturn can cause a solid firm to lose value. This negatively affects the investor’s wealth. It is seen that how a bear market can drive profitable businesses down, and the whole point of investing in agriculture is to stay away from financial markets and add a layer of non-correlation to a portfolio, ensuring that the investor holds an asset that is unaffected by changing stock markets.

Buying Farmland as an Agriculture Investment:

A most ideal strategy for investors is to get profitable farmland, having a track record of producing an income yield. This method of agriculture investment allows the buyer to access the asset displaying all the characteristics. There are many risks to consider, like:

• Sourcing suitable land
• Sourcing and managing a farming tenant

These risks are managed effectively by associating with a professional agriculture investment consultancy. This will handle both the sourcing of land and tenant.