Investment on Farming
How To Invest In Farming Without Owning a Farm
) and Cresud (CRESY
).
), coffee (JO
), grains (GRU
), cocoa (NIB
) and sugar (SGG
)), others offer a basket of commodities. As an example of the latter, the PowerShares DB Agrifood ETF (DBA
) invests in corn, wheat, soybeans and sugar futures contracts. There's also the iPath Bloomberg Agriculture Subindex ETN (JJA
), which invests in corn, wheat, soybeans, sugar, coffee and cotton futures contracts, and the Rogers International Commodity Agriculture ETN (RJA
), which invests in a basket of 20 agricultural commodity futures contracts.
Source: By John Linton
Most Profitable Investment on Farming
If you’ve been down-sized, or are looking for a business to invest in, here are 5 profitable agricultural business ideas that you can start today:
Investing in farming can seem like a good strategic move. After all, whether the overall economy's in recession or booming, people still have to eat. Because of this, many investors regard agriculture and farming investments as being recession-proof. Further, as the world's population increases, farming will play an increasingly important role in sustaining global societies. (For more, read: A Primer For Investing in Agriculture.)
That said, literally buying a farm isn't a feasible strategy for the average investor. Buying a farm can require a large capital commitment and the time and costs of operating or leasing a farm are often substantial. Fortunately, investors have many other means to gain exposure to the sector beyond sinking money into a farm.
Farm REITs
The closest that an investor can get to owning a farm without actually doing so is by investing in a farming-focused real estate investment trust (REIT). Some examples include Farmland Partners Inc. (FPI
) and Gladstone Land Corporation (LAND
EquitiesThese REITs typically purchase farmland and then lease it to farmers. Farmland REITs offer many benefits. For one thing, they provide much more diversification than buying a single farm, as they allow an investor to have interests in multiple farms across a wide geographic area. Farmland REITs also offer greater liquidity than does owning physical farmland, as shares in most of these REITs can be quickly sold on stock exchanges. And farmland REITs also decrease the amount of capital needed to invest in farmland, as a minimum investment is just the price of one REIT share.
Investors also have access to an assortment of publicly-traded companies that operate in the farming sector. These companies range from those that directly grow and produce crops to those working in a variety of industries that support farmers.
Crop Production
One potential investment opportunity is in firms that plant, grow and harvest crops. Many of these firms also engage in such supporting activities as distribution, processing and packaging. Unfortunately, there are a limited number of publicly-traded crop production firms, which include Fresh Del Monte Produce Inc. (FDP
), Adecoagro S.A. (AGRO) and Cresud (CRESY
).
Supporting Industries
Investors can also buy shares in a variety of industries that support farming. Three of the largest industries are companies that sell fertilizer and seeds, farm equipment manufacturers and crop distributors and processors.
- Fertilizer and seeds. Many firms are involved in the production and sale of fertilizer and seeds, and investors will want to determine how much of each firm's revenue is actually derived from agriculture, as some also service a number of other sectors. Among the publicly-traded companies selling fertilizer and/or seeds are the Potash Corporation of Saskatchewan Inc. (POT ), Monsanto (MON ), The Mosaic Co. (MOS ) and Agrium Inc. (AGU ).
- Equipment. Farming's an equipment-intensive activity, so investors can gain exposure to the sector by making investments in equipment manufacturers with an agricultural focus. Two firms heavily involved in farming equipment are Deere & Co. (DE ) and AGCO Corp. (AGCO ).
- Distribution and processing. Many companies provide the infrastructure that moves crops from the farm to the local grocery store. Among those that transport, process and distribute crops are Archer Daniels Midland Co. (ADM ) and Bunge Limited (BG ). As with equipment manufacturers, some of these distributors only derive a portion of their revenues from agriculture-related activities.
ETFs
Exchange-traded funds (ETFs) are a good tool for investors to gain diversified exposure to the agriculture sector. The Market Vectors Agribusiness ETF (MOO
), for example, offers access to a diversified set of businesses, investing in companies that derive at least 50% of their revenues from agriculture. Another ETF with exposure to agriculture and farming is the PowerShares Global Agriculture ETF (PAGG). (For more, read: Top 3 Agricultural ETFs.) Like investing in any type of ETF, investors should carefully consider each ETF's management fees and the performance of the index that the fund tracks.Mutual Funds
There are also mutual funds that invest in the farming and agriculture industries. If this sounds appealing, you should first determine whether the fund invests in agriculture-related firms or invests in commodities. Also, keep in mind that many of these funds have exposure to other sectors along with agriculture. So if you're more interested in making a pure farming or agriculture investment, you're likely better off going with other types of asset classes.
When investing in mutual funds, investors need to consider fees and past performance, and compare these to those of ETFs, for example. Mutual funds with exposure to agricultural firms or commodities include the Fidelity Global Commodity Stock Fund (FFGCX) and the CI Global Infrastructure, Timber, and Agribusiness (INNAX).
Commodities
More speculative investors may be intrigued by the idea of directly investing in commodities, hoping to take advantage of price changes in the marketplace. While you can gain exposure to commodities just by purchasing futures contracts, there are also a number of ETFs and Exchange Traded Notes (ETNs) that provide more diverse access to commodities.
While some ETFs and ETNs give investors exposure to a specific commodity (such as corn (CORN
), livestock (COW), coffee (JO
), grains (GRU
), cocoa (NIB
) and sugar (SGG
)), others offer a basket of commodities. As an example of the latter, the PowerShares DB Agrifood ETF (DBA
) invests in corn, wheat, soybeans and sugar futures contracts. There's also the iPath Bloomberg Agriculture Subindex ETN (JJA
), which invests in corn, wheat, soybeans, sugar, coffee and cotton futures contracts, and the Rogers International Commodity Agriculture ETN (RJA
), which invests in a basket of 20 agricultural commodity futures contracts.
The Bottom Line
Investors looking to invest in the farming sector have plenty of alternatives to actually purchasing a farm. Investors who hope to most closely replicate the returns of owning farmland can purchase a farmland REIT. For those looking for wider exposure to the agriculture sector, making equity investments in crop producers, supporting firms or ETFs could be their best option. And those looking to profit from price changes in agricultural commodities have a range of futures contracts, ETFs and ETNs at their disposal. With all of these options, investors should be able to find an investment vehicle and strategy that fits their needs.
Source: By John Linton
Most Profitable Investment on Farming
If you’ve been down-sized, or are looking for a business to invest in, here are 5 profitable agricultural business ideas that you can start today:
1). Fish Farming:
Over 50% of Nigerian households will eat something that contains fish today. That’s right, Fish! This is a staple food in every Nigerian home and people eat it every week.
The fishes that are most highly in the demand are cat fishes and tilapia. There’s weigh more than enough market for them in Nigeria, and they will always sell out of your stock as soon as they’re grown, based on the buyer’s specifications.
The size of your fish farm determines a lot in how profitable you’d be. The larger your space, the larger your fish products, and the potentially higher your sales would be. Hotels, restaurants, fast-foods, and hospitals (homes inclusive) buy a lot of fishes on a daily basis. This agricultural business idea is one you can start today.
2). Cassava Farming:
The demand for cassava products in Nigeria cannot be accurately quantified. The uses and demand far exceeds the supply.
By-products like garri, fufu, and bread, are the daily staple foods of almost every Nigerian. 95% of Nigerian households consume one of these meals everyday.
The endless uses of cassava for meals, and even for alcohol has made it’s demand far exceed it’s supply and as such, many local farmers are reaping good profits from growing this crop. It’s diverse use has overtime made it one of the most profitable agricultural business idea (at a good scale) any entrepreneur can start.
3). Poultry Farming:
The consumption of chickens and turkeys in Nigeria & Africa as a whole is sky rocketing everyday. Thousands of tons are consumed daily and the local supply cannot meet the demand. This has resulted to subsequent importation of thousands of poultry products into the country on a daily basis. This market deficit alone shows the potential of poultry farming in Nigeria. No wonder even an ex-president of Nigeria reportedly owns one of the largest poultry’s in Africa.
With a small space in your backyard and little cash to buy day-old chicks, you can start this agricultural business idea.
Poultry farming in Nigeria and Africa as a whole is one of the most highly profitable agricultural business ideas you can start today!
4). Grain Farming:
Nigerians and Africans as a whole consume millions of tons of rice, wheat, and oats every year. These are standard meals that every African family consumes in a week. In Nigeria for instance, almost every home eats rice on Sunday afternoons. Most other homes consume wheat everyday, and others consume oats. These meals account for a very large volume of food consumed in the country.
What’s more interesting is the fact that Nigeria still imports thousands of tons of grains everyday. In 2013 alone, Nigeria imported wheat worth $1 billion dollars. This shows the true potential of grain farming and it’s possibilities. Widespread local production can cut the importation by half and create thousands of millionaires from growing grains alone. This is one lucrative agricultural business idea you can startup.
5). Tomato Farming:
Did you know that over $500 million dollars worth of tomato pastes are imported into Nigeria every year? Yes, $500 million dollars! The answer is simple, the supply is far lower than the demand.
This is one agricultural venture that goes unnoticed. A lot of people tend to look elsewhere never realising that this profitable enterprise has always been staring them in the face.
If you’re looking for lesser competition, grow tomatoes. Once you can find a way to transport, grow (in a large scale) and keep them looking fresh for a long time, the sky would be your stepping stone!
This agricultural business idea is one you can easily start today in your backyard and grow from there.
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