Whether you realize it or not, society relies on agriculture. Food, clothing, and shelter all have roots in farming. However, farmers need money to manage their farms and deliver crops to the necessary stores.
As populations grow, farmers have to feed more people with a fixed amount of land. By investing in agriculture, we can still accommodate the expanding food demand of future generations without becoming farmers ourselves.
Here are some common myths about investing in agriculture that you should weed out during your research process.
Table of contents
Investing in farmland is complicated and risky
There is no such thing as a risk-free investment. If you stumble upon one, you’re probably the victim of a scam. However, the agriculture industry is not inherently more risky than any other. One advantage to an agricultural investment is that it does not rely on the stock market, meaning you can garner more sizable returns than other assets. Furthermore, it does not sway as much from inflation.
Some companies back your investment with land, such as FarmFolio. With resources like these on your side, you own plots of farmland to support the agriculture industry. Though the land may be susceptible to damage from pests, fire, disease, and droughts, you can subscribe to crop insurance and diversify your commodities to protect yourself if a natural disaster occurs.
To further safeguard yourself from risk, try to invest in multiple farms in different locations. Diversifying geographically can protect you financially and support several agriculture industry sectors.
Overall, farmland is a relatively stable investment. The value of farmland has nearly consistently risen since 1988, though the precise worth depends on the region. It is less volatile than commercial land investments, and it helps diversify your portfolio.
Farmland value will continue to rise with the population and demand for food. Also, conservation efforts, urbanization, and climate change limit the amount of land available for farming. All in all, it’s hard to go wrong with a farmland investment.
Agriculture is not a growing industry
Agriculture may be one of the oldest industries, but it continues to grow and evolve. Financial experts predict that the agriculture market will continue to expand between 2021 and 2026. Innovative technologies will expand the number of people that one farmer feeds by making it easier to grow crops in bulk.
For example, AppHarvest operates indoor farms that grow nutritious, affordable, non-GMO, and pesticide-free produce. AppHarvest farmers use 90% less water than standard agriculture. The only water used comes from recycled sources, lending to its sustainable business model. Since farming occurs indoors, it does not suffer from environmental damages like open-field processes.
GPS devices can operate tractors remotely, drones can check on animals at any time of day, and robots can carry out many farming activities. The expansion of the technology sector has led to simultaneous innovations in the agriculture industry.
You need to know agriculture to invest in it
Chances are you do not know much about agriculture, despite it being the backbone of modern society. However, this massive industry covers many different topics apart from farmers, such as:
- Nurseries and florists that grow plants for sale
- Biotechnology and pharmaceutical firms interested in plants
- Biofuel production facilities
- Veterinarians
Regardless of what one classifies as agriculture, you do not need to understand zoology, biology, or agricultural science to invest in it. You can put your money in agriculture as you would with any stock. The most fundamental aspects of agricultural investments are the geographical location, market conditions, and the manager’s experience.
If you wish to invest in farmland and have a direct hand in it, you should learn a thing or two about agriculture. However, most investors are simply looking to diversify their portfolio when considering an agricultural investment. Those in the latter boat can treat it like any other stock. After all, you don’t need to know how to produce a television show to invest in Netflix.
Elites control the agriculture industry
Farmland is not all owned by big corporations. From a historical standpoint, people could not invest in agriculture unless they wanted to run a farm. Past inabilities to own farmland had to do with lack of access since many farms stay within families. These days, families still own most of the United States’ farmland.
However, young people are not as interested in farming as they used to be. This transition will open more farmland to investors interested in owning land. Furthermore, technological advancements make running a farm with minimal agricultural knowledge possible.
Many plots cost a lot of money to purchase. If you look around, you can find investment opportunities that cost less than $5,000. Overall, you will need more capital than you would if you plan on dabbling in stocks to invest in farmland. However, you do not need to spend your life savings on some land.
Alternative agriculture investments like timber and livestock operations do not have as steep an upfront cost as purchasing a massive farm. You can even invest in agricultural engineering stocks to support the industry for a lower price.
It takes decades to earn the principal back
As with most investments, you won’t see your money back immediately. However, it may only take a few years to earn back your principal. For the most part, you would get your dividends annually during the harvest.
Some farms have several harvests each year, so they pay out more frequently. Other farmers may agree to deals that pay you throughout the year.
If you want to increase the frequency and quantity of payments, consider diversifying your portfolio. Aim to support crops that grow in different seasons and global locations.
Wrapping up
If you want to support the agriculture industry, you should prioritize investing in farmland and agricultural stocks. You do not need to know everything about the field to get started, and you can spend a relatively small amount. Don’t let these myths about the agricultural industry prevent you from planting the seeds of a life-changing investment.
