Today we shall be looking at some of the main Challenges for Agricultural Financing and How to solve them. Those in the agricultural sector know very well about the existence of challenges for agricultural financing. For years on end, there have been talks about how financial service providers should be involved in this industry. We are well aware of the fact that farmers and many agricultural SMEs are not usually very welcome in banks and microfinance institutions that offer financial services. it is actually known that not more than 2% of the entire demand for global financing that smallholder farmers have, is met by the financial service providers.

We also know very well why this is actually an existent issue. Research has shown that there are quite a number of significant risks that are quite specific to the agricultural sector, including:

• Natural disasters
• The volatility of crop prices
• Pests and diseases
• The lack of proper coordination within the value chains
• The heavy long-term financing needs

All of the above challenges make it quite hard for financial institutions to build the confidence to lend money to the farmers. Not forgetting that it can be quite hard to assess the Return on Investment for the small farms.

Check out this 4-part agriculture series for insights (How to make agriculture money in 2020 and beyond)

International financial institutions that are trying to make their way into the untapped rural areas to finance the farmers also meet some unique challenges. The main challenges that have been reported so far include forex losses, loan defaults, the removal of subsidies of various inputs even after that was a factor that motivated them to step into the untapped market, as well as significant production-related losses arising from unprecedented events, leading to the very rapid deterioration of the bank’s credit portfolio.

To that regard, the only question we can ask ourselves is whether financial institutions should even care about the agricultural sector at all. Are there any outstanding strategies that could be relied upon to see to it that efforts to tap into the rural areas are feasible? The answer is yes! We are currently facing such a huge demand for food in the present-day world, which is something that creates more investment opportunities. The demand for food is actually expected to grow more rapidly as:

• The global population grows
• Life expectancy increases
• The urbanization rates grow
• The capability to change diets arising from an increase in income becomes higher

Global agricultural production has also been increasing gradually to meet market demands. All of this information works to support the idea that financial service providers should actually have a look at what is going on in the agricultural sector and actually be actively involved.

Strategies for combating the challenges  for agricultural financing

The experts in this industry have managed to come up with strategies that they perceive as the best for tackling the challenges that FSPs in the agricultural sector experience. These include:

1. The improvement of the FSPs understanding of the nature of agricultural markets, as well as increasing their capacity to assess potential business opportunities

This calls for a dynamic shift towards the utilization of a value chain approach that usually considers all sets of factors, along with the processes distributed across the entire value chain at the time of making all financial decisions. This is an approach that is bound to create an opportunity for financial institutions to acquire knowledge from various stakeholders, including:

• Input providers
• Traders
• Processors
• Wholesalers
• Informal service providers – those who have an informational advantage that comes from direct engagement with various facets of the value chain.

FSPs can also look into how quantitative data can help them form market intelligence to support agricultural finance. This can lead to significant savings before they can even move out to do qualitative analysis for their financial product design.

2. The diversification and adaptation of products and services for various players in the value chain

Financial institutions need to learn how to identify all additional client needs,  as well as their capacities and opportunities so that they can be in a position to offer additional services. This process also calls for the development of partnerships with the key local actors, in a bid to establish more efficient and cheaper ways to deliver extra services. Any additional financial service that is offered in the rural areas has the potential of increasing the returns for the FSPs and significantly growing the profitability of the rural portfolio.

What do the experts have to say about the oncoming food crisis?

3. The establishment of strategic partnerships with select non-financial service providers, in order to transfer the non-financial costs to the entities that are responsible for them

Non-financial costs are essentially related to all the technical assistance that is needed to strengthen the organization and coordination of activities between the stakeholders in the value chain. This includes:

• Capacity building for the smallholder farmers
• Cooperatives
• SMEs in various areas ( marketing, financial management, as well as governance).

Such partnerships are bound to open the door to win-win collaborations, in which financial institutions get to offer the needed agricultural finance, as the public sector takes care of all the other complementary development objectives.

The public sector can actually facilitate the creation of an enabling environment for the establishment of agricultural investments, as well as the identification of new market opportunities that private investors can take up.

4. The identification of alternatives to loan guarantees that are based on tangible collateral

Financial institutions tend to reject most business proposals presented by farmers regardless of the potential returns, due to the farmers’ lack of collateral. Trying to integrate farmers into the financial system will call for FSPs to be innovative not only in the creation of financial products but also in the establishment of effective processes. One of the ways to minimize risk as experts have established is to find out all processes and indicators that have little weight on the guarantees and to actually focus on performance indicators. The new processes that are based on alternatives to the traditional collateral-based lending can also play a significant role in the reduction of the time that goes into the approval and disbarment of farmers’ loans.

Broaden Your Knowledge About How Investing in Agriculture-How To Do It In This Decade ( Survive The Food Crises and Profit)

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That will be all for this article about some of the main challenges for agricultural financing and how to solve them. I hope you found it educative and that it will now inform your decisions if you are in the field of precision farming. If you are a sucker for research-backed investments, then do have a look at my recommended agriculture 4 part series also, just to ensure that you get all the investment factors in the agricultural sector for this decade right.

I wish you well,

Eric, Bitcoin Investor, and Team Member of Gold Retired!

Experts have so far identified some common precision farming mistakes that farmers,  whether in their beginner levels or in the pro levels should avoid if they are to expect any success.  In order to establish a good foundation about the nature of mistakes that can be expected,  we can have a look at what precision farming is, to begin with.

Make This Your Decade- Venture into research-backed agriculture to thrive financially

What is precision farming?

Precision farming refers to what type of farming management concept that is usually based on the observation,  mensuration,  in response to the inter and intra field variability. The main goal of precision farming is usually to create a decision support system for the entire farm management, in a bid to optimize the returns on inputs, while still preserving their available resources. 

Precision farming, also known as precision agriculture,   is characterized by the use of information technology,  as well as  a collection of items  that include : 

•  GPS  guidance
•  Control systems
•  Sensors
•  Robotics
•  Drones
•  Autonomous vehicles 
•  Variable-rate technology
•  GPS best soil sampling 
•  Telematics 
•  and software

 As already described, The use of the above items and is meant to make the practice of farming a bit more accurate and controlled. 

Precision agriculture is perceived as a key component of the Third Wave of what is known as modern agricultural Revolutions.  The very first wave of the agricultural  Revolution was characterized by an increase in the use of mechanics.  this wave lasted between 1900 and 1930.  During this period each farmer was capable of producing enough food to feed close to 26 people.  The second wave of the agricultural Revolution (green revolution),  was characterized by new approaches to genetic modification,  that saw each farmer’s capacity to produce food rice too close to 155 people.  By 2050,  the entire global population is expected to be above 9.6 billion,  hence food production should be doubled from the present-day levels in a bid to ensure that every month is fed.  Precision farming has enabled the present-day farmer to feed 265 people on the same piece of land. 

There is an evergrowing demand for food in the present day world-Here is how to position yourself to profit in 2020 (and beyond)

Common mistakes in precision agriculture 

 You can agree with me that,  with the increasing demand for food,  we cannot afford to make mistakes as far as food production is concerned. In this article, we shall look into the main mistakes that farmers should seek to avoid if their objective is to prosper.

Making unnecessary withdrawals

Precision farming is most likely going to bring in a  significant amount of income on a predetermined basis.  it could be once a month, or once a year.  whatever that may be, to a farmer,  he or she should ensure that unnecessary withdrawals and debt are avoided by all means.it  Is also prudent to avoid investments that are made on a whim,  to the purchase of products that are quite costly. One can go through the expenditure list,  and highlight everything that they purchased and did not use in the last year.  how much money could they have saved? 

Poor record taking 

Coming from the list above,  you may have that to yourself, “I actually do not have an expenditure list!’.  if that is you,  then you have run right into the second common mistake that can make when doing precision farming.  one should never get sloppy with the record taking. Everything from profits and losses to expenditures, maintenance, and ongoing costs should be budgeted for and managed carefully. 

There is also the part in which the farmer is supposed to keep records on items such as:

• Soil data
• Soil maps 
• Irrigation stats
• Weather patterns 
• Harvest yields 

Keeping good and understandable records is crucial for the creation of an understanding of how to improve any farm.  It is also essential for the establishment of areas that need improvement,  and for the simplification of the sorting of taxes. 

Not learning from past mistakes 

Refusing to take lessons from one’s past mistakes ( in some cases even refusing to admit to having him committed the mistake in the first place), is one of the things that can undermine your success as a precision farmer.  if you fail to record the data that matters,  and also failed to analyze the mistakes that you make,  you are highly likely to repeat the same mistakes over and over again,  and this can cost you time, effort, and money. 

 A better way of dealing with this is to actually reassess the farming methods and practices,  even before actualizing them and making the mistakes.

 You can for instance assess the efficiency of the tractors and farm equipment before purchasing either, by making comparisons with the stats for industrial averages.  this will help you ensure that the Final product that you settle on,  is the best for the amount of money you are spending and that it will serve you in the best way possible. 

Focusing on quantity, not quality 

Having more crops does not always mean that he will have profit.  you should therefore focus on quality, not quantity.  By farming a small quantity of high-quality crops such as beetroot,  you can end up fetching more profits than what everyone else who is Farming corn in your estate is.  doing some research about the market niches is a good way to determine which crop will be most profitable for you,  even on a small piece of land. 

Farming alone 

 There is a lot of help that you can source from various farmers,  regardless of your current location.  By teaming up with a group of other farmers,  you can end up improving agriculture. You therefore do not have to make the very tough decisions on your own.  you can meet other farmers on Online forums,  where you can put forward the questions that matter,  and to contribute in areas that you are knowledgeable in. 

As you can see, one can go about precision farming very well if they intentionally decide to avoid such issues. With minimal but gradual effort, you can make that money blackhole disappear, as you fulfill an even greater goal of feeding a larger number of people. Taking into perspective all the elements of farm management will generally reduce your stress levels to a great extent. Precision agriculture may be tedious in the beginning, but you will begin to attain a sense of fulfillment as you can control various elements of production, and as you avoid some crucial mistakes. 

Deepen Your Knowledge About Profitable Agriculture with this 4-part Series | Trends To Look Out For In This Decade

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That will be all for this article about precision farming mistakes. I hope you learned something new, and that you will not hesitate to even deepen your knowledge about profitable farming by going through the above-recommended 4 part series. I believe you will have an eventful decade if you acquire sufficient knowledge before you dive into any type of agricultural venture.

I wish you well,

Eric, investor and team member at Gold Retired!

Agriculture can be a very lucrative way of making money also when you think about the most profitable crops per acre.  As a farmer or investor,  your main goal is usually to reap the maximum amount of money possible,  for the capital that you pour into the venture.  good thing is that there is no shortage of opportunities in the sector,  provided that you choose the right approach as you make the investments.

At times however you will find yourself being limited by the factors of production,  one case in the example being the size of the land that is accessible to you.  in this case,  it is essential to see to it that you control all the other factors of production,  to get the most output in a given season-  which in some occasions can include determining the most profitable crop to farm.

Here some examples of the most profitable crops per acre:

1. Saffron

Saffron may actually be the most pricing legal crop in the entire world.  It goes for around $2500 per pound,  making it the most expensive culinary herb. It can be hard to describe what’s this plant tastes like, most people talk about it as having a floral honey flavor.

Why does this plant cost so much? Apparently Saffron comes from the stigmas of the crocus plant.  Close to 75000 flower cash needed to produce a single pound of dried saffron.  To grow this number of crocus flowers,  one needs a quarter acre of land- So you can begin to have an idea of how lucrative growing the crop would be.

Saffron has been found to grow best in dry regions that have mild winters,  such as California.  One can however plant them in polytunnels or greenhouses if living in other regions.

Ready To Thrive As An Investor in the field of agriculture? Here is what you need to know before you get started

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2. Cannabis

This is a crop that has been quite controversial for years but has been gaining a strong footing in some continents due to the realization that it has very valuable health properties.  Cannabis exists in two forms that is hemp and marijuana.  The difference between the two forms is very significant,  and sadly most people do not know this.  They belong to a similar plant species referred to as Cannabis Sativa L.

Industrial hemp is characterized by high-fiber and low THC (that is tetrahydrocannabinol).  THC is the psychoactive component in marijuana.  With one acre of hemp,  one can harvest close to 700 pounds of Grain,  which can later be processed to produce 22 gallons of hemp oil or an equivalent of 5300 pounds of straw that is later turned into fiber. The money he will fetch for each end product varies from one state to another,  but you can be sure that the yield for 1 acre Can fetch you quite an impressive amount of money.

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3. Bamboo

This is one of the fastest  Rohan plants in the entire world. In fact, there is a species in Japan that grows at a rate of more than one meter per day.  You may tend to think of bamboo as being a tropical plant, but other very hardy varieties have the capability to survive winters even when the temperatures drop below zero degrees.

So far,  who has been identified as a very versatile landscaping plant that can be sold in its standalone form,  are used in the creation of hedges and screens. They are homeowners and landscapers who are usually willing to part with as much as $150,  to lay their hands on a single potted bamboo plant.

If one decides to grow their bamboo in pots in their nursery, they can produce several thousands of dollars worth of this plant in a single year.  One can for instance grow up to  600 bamboo plants in 5-gallon pots placed in a piece of land that measures 40 feet by 30 feet.

There is actually hope that this plant is going to be even more profitable in the future since it’s gaining popularity as a raw material in the textile and fabric industry.  If you are living in a climatic region that supports the growth of bamboo plants outdoors,  this is a plant that you can actually consider growing as a cash crop.

How To Profit as a farmer in this decade – Advice From The Experts

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4. Goji Berries

Goji berries are quite nutritious and packed with antioxidants, and are well-known for having both anti-aging and anti-cancer benefits. They are therefore highly sought after as a superfood. Most of the Goji berry produce comes from China, though the North American Climate also favors their growth equally well.

The organic and dried berries fetch over $20 per pound, with the fresh berries fetching an even higher price. One can grow up to 7000 pounds of these berries on a single acre of land, making it one of the most valuable types of berry.

Goji berry plants usually grow best when they spend the first weeks of their development in a greenhouse, before being transported outdoors. This makes them withstand both the cold winters and the cold summers effectively.

As you can see here, there are quite some valuable opportunities that can be tapped into if one is all about making money in the agricultural sector. The one thing one cannot do is simply take a blind leap into it all, expecting that somehow things will go well. There are some global trends that you need to be aware of, moreso if you are trying to scale up your production in a bid to earn a lump sum of money. Even as a farmer who is out to simply ramp up your production so that you can meet the demand for food in the market, you can do an even better job if you take the time to do some research about the state of affairs in the agricultural industry, and how best you can position yourself to ensure that you achieve your objectives.

To that regard, you can actually have a look at what the recommended 4 part series below has to offer in terms of information that can guide your decision making as you navigate this field. Have a look at what the experts have to say about the state of affairs in this field, in this decade.

Recommended Agriculture 4-Part Series

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I hope you enjoyed today’s article about the most profitable crops per acre and that it will give you insights on the crops to target as a farmer or as an investor. Do you have any other crops inn mind, that you think I should have highlighted? Feel free to share them in the comments section. If you also have any questions, then you can drop them in the same section. All the best as you excel in whatever it is that you settle on.

I wish you well,

Eric, Investor, and Team Member at Gold Retired.

Are there any top agricultural investments that you should know about so that you can seize the opportunities right away and start building the foundation of your financial prosperity as a farmer or investor? 2020 has been quite the dynamic year for all investors, including those in the agriculture sector. One of the best ways through which we can acquire a deep understanding of the pace of the agricultural investments is to have a close look at consumer food preferences.  For starters, the sales of fresh food in 2019 alone increased by $4.6 billion, that of organic farm products by $925 million, and that of plant-based products by $982 million.

The present-day young generations have figured out their way around living a health-conscious life, and this has been reflected in the type of foods that they eat, and their inquisitiveness as to how that food was grown and by whom. Such are developments that are worth looking into, which is why I think knowing about these top investment trends below would be beneficial from an investors’ perspective:

Have you heard about the oncoming food crisis? Ready to Survive and Profit? 

The production of plant-based protein

The very fast rise of plant-based proteins such as Beyond Meat has been a key driver of the move by farmers to adjust their production goals to produce more of the crops that are in line with the supply of these products. Truth is that opportunities exist for those farmers who would like to acquire portions of land to grow and supply such crops to the underlying processing companies.

With Beyond Meat, for instance, the ingredients included in the final product include peas, brown rice, sunflowers, as well as a variety of beans such as mung and fava beans. As much as the prices of peas have dropped to their lowest in the past 20 years ( as a result of tariffs reducing demands instigated by China), it is also known that the overall production of this crop has increased by 40% ( from 2019). If this is a field you are interested in, then you will be happy to know that Cargill recently injected $100 million in Puris Food, a well-known producer of pea protein.

Hemp and CBD

Hemp and Marijuana are part of the Cannabis family. Unfortunately, most people confuse Hemp with marijuana, therefore doing away with anything in the name of marijuana including potential legit income-generating opportunities. Cannabis has several compounds known as Cannabinoids, the two dominant ones being:

• Tetrahydrocannabinol (THC)
• Cannabidiol ( CBD).

The two compounds have been found to have some outstanding benefits to the human body, though THC has psychoactive effects in the way it makes its users get high. CBD on the other hand does not have the psychoactive properties. Hemp has an extremely low concentration of THC, whereas marijuana has a high concentration of THC. It is due to this reason that marijuana is produced for recreational and medicinal properties, whereas hemp is grown as an industrial and non-drug variant of Cannabis Sativa l, harvested for its fiber, hurd, seeds, hemp wood, and hempcrete.

The 2018 Farm Bill legalized the production at a federal level, thus enabling states to come up with their programs to grow industrial hemp. This law made it legal for hemp to be transported across state lines, thus expanding both export and sales options for investors. In addition to that, crop insurance has also been extended to hemp operations, thereby minimizing the overall risk that was initially borne by the farmers.

The global market for the entire world is expected to go up by $10.6 billion by 2025. Such is an investment opportunity that is worth looking into.

Agricultural Investments are at times risky, but they don’t have to be a juggle for you. Get the facts right and thrive financially!

The use of Natural Sweeteners

Americans are gradually limiting their intake of sugar and embracing the use of natural sweeteners instead. Crops such as dates, raisins, and some other types of fruits have been very useful in this case. According to the Whole Foods 2020 Report, consumer brands are expected to replace sugars placed in various desserts and marinades with the syrup reductions sourced from fruits like pomegranates, dates, and coconut. These are definitely crops to keep an eye open for, since if the predictions are to go by, then we can expect a significant price increase in the next 1 to 2 years.

The practice of indoors agriculture

For several thousands of years now, soil-based agriculture has been the main type of agriculture. In the recent past, however, other novel farming systems have started to gain dominance. Indoor farming, or what is referred to as controlled environment agriculture (CEA), carries the promise of revolutionizing and decentralizing the entire food system in the USA. CEA is expected to bring the food production units closer to the consumers, which is one way that will help with the improvement of the quality, taste, and consistency. Vertical farming is for instance expected to rise by a cool 33% ( period lasting between 2018 and 2024). Not forgetting that the sales for locally grown produce went up by 66% in the period lasting between 2014 and 2019.

Grass-fed meat

Despite there being an increased demand for plant-based proteins, the demand for meat products in the form of beef, poultry, etc., is likely to remain consistent over the years. One thing to note, however, is that consumers are getting more concerned with the conditions under which the animals are brought up in, and that includes the food that is fed to them. At the moment, an estimated 41% of all Americans view animal welfare as a social cause worth pursuing.

One main trend we can therefore expect in the years to come is the increase in grass-fed meat production. An estimated 50% of all beef that is consumed in the USA is sourced from Australia. This essentially shows that there is a significant opportunity for the growth of the North American beef industry.

Where exactly is the Agriculture Money At? Get Valuable Advice From a Seasoned Investor

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These are just but some of the top agriculture investments that you can consider as you diversify your portfolio. My general thoughts on this field is that there are numerous opportunities to be taken advantage of, and any investor who is out to make a fortune can with sufficient information go about the investment process with confidence. Take your time to have a look at what the 4 part agriculture series has to present so that you can get a clearer picture of what the agriculture landscape is looking like. Knowledge is power, it has been said, so you should arm yourself with sufficient facts before spending a single dime on any opportunity. That said, I wish you a great time maneuvering your investments and making that money.

I wish you the best,

Eric, investor, and team member at Gold Retired!

This article will be about how to invest in farming & agricultural stocks, and why now might be the time to do it. If you haven´t considered this yet I really hope, and got a feeling you will after you have read through this detailed text, also, you might want to watch the videos further down.

P.S.

There is a reason why we (the whole team at Goldretired) consider farming and agricultural stocks to be the most profitable (and IMPORTANT) investment right now, the trick is (as always) to know what particular stocks to pick. Don´t worry, we got you covered on how to do that with a 4-part audio series plus a free downloadable trade alert on this page.

Ok, with that being said, let´s start to look deeper into this very important (and profitable) subject!

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How to Invest in Farming & Agricultural Stocks (Why now?)

Agriculture is the industry that never dies. People will always have mouths to feed, and as populations grow, the demand for food increases.

As the United States operates through a recession, many individuals are looking for ways to make money. People often consider farming to be “recession-proof” because humans will always need food.

However, the coronavirus has broken our food system globally, and food prices will rise dramatically in the foreseeable future. Additionally, Germany’s response to the African Swine Fever, in which they forbade farmers from harvesting crops, thus contributing to the idea that there will soon be a global food shortage.

A global shortage means that the supply will not match the demand, increasing the price of farmland. Farmland has seen a steady growth rate with returns of 11% to 12% over the past 20 years, but these statistics may change rapidly.

People rely on agriculture for food and fuel, meaning there is a permanent demand for farmland. This industry is independent of other markets, and inflation will only cause a higher income for each crop. Farmland will always rise in value.

How to Invest in Farming

Whether you want to buy a farm or purchase stocks, you have a way to get in on the agriculture market. There are plenty of ways to invest in agribusiness, and many companies qualify for this title. As long as the business contributes to farming in some way, it can count for your agricultural investment portfolio.

Directly Buying Farmland

When wondering how to invest in farming, your first thought might be to buy a farm. Owning farmland produces high returns, even if you are not a farmer. Nevertheless, this investment requires large capital upfront, as farms aren’t cheap.

While about 60% of farms are farmer owned, non-farmer landowners rent about 40% of the land. Typically small family farms are tended by the landowners, but the larger ones have lease agreements that can last for several years. These leases mean the farmer’s rent can cover the mortgage and then some, providing an excellent return on your investment.

Investing in Farm REITs

If you don’t have that kind of money, the second closest you can get to owning a farm would be through an investment in a farm real estate investment trust, or REIT.

REITs operate through purchasing and leasing farmland to farmers. There are many benefits to investing in a REIT as opposed to buying a farm. 

First of all, they help with diversification, as the investor can have interests in several farms in different locations. They also offer more liquidity, since you can quickly sell your shares on stock exchanges. Lastly, the minimum investment is the price of one REIT share, making it much cheaper to invest in than farmland itself.

Three farm-focused REITs that profit from the population boom include Gladstone Land (LAND), Farmland Partners (FPI), and American Farmland (AFCO). These farmland REITs are currently small-caps, but FPI and AFCO may merge soon, pushing the market cap to over $400 million.

Purchasing Farming and Agricultural Stocks

To make one of the best agricultural investments without investing in farmland, consider investing in farming equipment, goods, and services.

One way to do so is by purchasing stocks, or equities, in the farming and agriculture industry.

Some of the publicly-traded companies in agriculture support growth and distribution, fertilizer and seeds, and equipment. This way, you can support farmland without owning any.

Consider investing in firms that plant, grow, and harvest crops. This sector is limited, but some choices include Cresud (CRESY), Fresh Del Monte Produce (FDP), and Adecoagro (AGRO). Some companies that work with distributing, processing, and packaging crops are Bunge (BG) and Archer Daniels Midland (ADM).

Another one of the most vital aspects of farming is the production and sale of seeds and fertilizers. Some companies include the Mosaic Co. (MOS) and Nutrien (NTR). For equipment, look towards John Deere (DE) and AGCO (AGCO).

Other large companies to consider are Bayer (BAYN) and DuPont de Nemours (DWDP).

Exploring Mutual Funds and ETFs

If you want to buy stocks but don’t know which ones will yield the most profit, you can purchase a farm-focused mutual fund or exchange-traded fund. These mitigate risk by buying shares of some of the above commodities and bundling them into a fund with mid-level returns.

P.S. Do NOT forget to take advantage of the FREE Trade Alert on this page

Mutual funds and ETFs often have fees, so consider these costs before investing. While you will receive a moderate return in the short run, you may end up paying the provider more than you make as time goes on.

Some examples of these funds include Oak Ridge Global Resources and Infrastructure Fund (INNAX), iShares Global Agriculture Index ETF (COW), Fidelity Global Commodity Stock Fund (FFGCX), VanEck Vectors Agribusiness ETF (MOO), and the Invesco DB Agriculture Fund (DBA).

Commodities

If you are a speculative investor, you may want to invest in commodities to take advantage of the stock market’s price changes. You can look into these assets by purchasing futures contracts and looking into ETFs and ETNs, or Exchange Traded Notes.

While some ETFs and ETNs expose you to specific commodities, like coffee (CAFE), cocoa (NIB), and corn (CORN), others give you several. An example of the basket commodities is the aforementioned DBA, which invests in corn, soybeans, sugar, and wheat futures contracts.

Investing in Farm Debt

If you want to invest in the farmers themselves, consider lending to them through subsidies or loans. Farmers are often in debt because of the high capital of the farming industry. It can take several years to pay off necessary equipment, and farmers often have big mortgages on their land. Furthermore, weather changes greatly impact their ability to sow fields, and if a season is not in their favor, they can struggle to make ends meet.

To cover these and other annual investments, like fertilizer and seeds, farmers need short-term loans. You can help out by purchasing long-term or short-term farm debt either directly or through bonds. The farmer will pay back monthly or quarterly, giving you consistent income.

Remember that purchasing debt comes with a risk: the farmer may not have the ability to make their payments. To be careful, look for a farmer in good financial standing.

Investing in a subsidy program will give the farmer something to fall back on in years of lower crop yields. It can help them remain competitive with imports and maintain their soil quality. However, the government gives most subsidies to commercial farmers rather than family farmers, so research your investment beforehand.

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Why Are Food Prices Increasing?

The coronavirus pandemic introduced the world to lockdowns to reduce the spread. While this mandate promoted people’s safety, the lockdown resulted in decreased supply and labor in the food industry.

Global panic over COVID-19 and other diseases, like African Swine Fever, has led to the destruction of food and seeds. As a result, crops are not being planted, grown, or harvested, which sets the stage for a food shortage.

The demand is beginning to exceed the supply, causing food prices to increase.

Lockdowns

Countries around the world forced their citizens into lockdowns to prevent the spread of coronavirus. Since scientists knew little of coronavirus’ dangers and people were continually dying from it, this seemed the right thing to do. When implemented correctly, lockdowns kept people safe from the virus, but not at the expense of the economy and many industries, including agriculture.

Closing off borders meant countries reduced food exports and imports for fear of contamination. Governments have become concerned about preserving their food sources. Thus they disrupted supply chains globally. Countless migrant workers in the agriculture industry cannot work from the border crackdowns, leaving produce unharvested and food rotting in the fields.

Many countries around the world are facing labor shortages. As such, they have limited their exports. India, Vietnam, and Myanmar have restricted, and in some cases banned, rice exports, Russia reduced grain exports, and Egypt has purchased more grain and stopped exporting legumes. 

As lockdown restrictions have lessened, some exports have returned to normal, but as cases climb in other countries, the limits continue.

The topic of extending or reinstating lockdowns as infection rates rise is under debate. On one hand, many people fear the disease and will likely abide by social distancing and mask-wearing guidelines. However, others protest against these restrictions. Some mention how quarantining lowers the immunity, but others worry about the death rate and want to wait for a vaccine.

While industries like manufacturing can reasonably withstand a lockdown, agriculture must follow a harvesting calendar, so labor shortages during certain times of the year prevent some crops from growing.

Destroying Supply

Farmers have shot pigs ready for slaughter, aborted piglets, and gassed chickens. Dairy farmers have dumped milk, broiler operations have broken eggs to reduce supplies, and labor disruptions caused produce to rot. The U.S. has even been at risk of meat shortages as plants shut down at a worrying rate.

More recently, Germany instituted an agriculture, forestry, and hunting ban as African Swine Fever reached their nation. They prevented farmers from harvesting their crops, leaving them to rot in the field. The pigs who carry this disease eat the corn, and the hunting ban means they will only thrive under these conditions, see video below:

Currency Debasement

Central banks have been fighting off deflation and risked surging interest rates in 2020 due to the massive debt build-up. Unconventional monetary policies ensued.

A short-term solution is governments running monetized fiscal deficits to avoid depression and deflation, meaning the central banks will be printing money. Nonetheless, in the long-term, the permanent negative supply shocks may lead to stagflation.

Today’s crisis is exacerbated by trade restrictions and panic hoarding, disrupting supply chains. The increased global movement restrictions, government interventions, trade wars, protectionism, and money printing only worsen the food shortage and raises prices.

Deglobalization

The process of deglobalization has already begun in agriculture.

During times of stress, agricultural trade tends to shut down. Countries are sensitive about the prices of staple foods like rice and wheat. These prices affect poor people disproportionately more, especially in emerging economies.

This lockdown forced many people not to work. Unemployment rates soared as people struggled to feed their families. Many people faced a difficult decision between rent and groceries. As a result, they protested. Rising food prices only add to the fire as the ability to eat becomes a precious commodity.

An instance of the reversal of globalization is the ban of foreign seeds on Amazon and Wish. Some people reported receiving unsolicited mystery packets postmarked from China containing seeds. 

While no one knows who sent these seeds, the results of planting them were mixed. A Utah plant lab showed that many of the seeds had no harmful effects. Scientists also confirmed these results in New Mexico. Some people ate them and felt fine. Others planted them and found they did not germinate. A few of them grew moldy or exploded. Overall, nothing too out of the ordinary.

Many people received these seeds for unknown reasons, but many others ordered them from China. The USDA told receivers to suffocate, bake, bleach, and burn the seeds, inciting fear of foreign products even though they were not proven to be harmful.

The response of Amazon banning international seed sales contributes to the idea of “Problem, Reaction, Famine.” The problem was people receiving foreign seeds; the reaction was prohibiting the product’s selling, which lessened the food supply. While this is a small instance, it insinuates a xenophobic idea of imported foods.

Australia is running out of homegrown rice, meaning they will need to import rice soon. The low crops result from poor water management that favored cotton over rice, and now they must increase their grain imports.

Meat factories are also facing closure from the lowered livestock supply and labor, impacting meat production.

Instead of managing the food supply, governments are working on upcycling food waste into edible products using an insect-based protein. Police have entered farmer’s markets, scaring people trying to buy groceries. Some have predicted that this is a way to prepare people for the upcoming food shortages.

Countries have stopped exporting to feed their people, even though this hinders their food supply as well. As these exporters are running out of crops, they rely on imports, but deglobalization has made countries not want to trade food, creating food shortages.

Climate Change

When we talk about climate change, we are talking about the planet’s natural changing climate, not anthropogenic global warming. One aspect of climate change is solar cycles.

The current solar cycle, named cycle 24, has us entering a decade long cooling cycle as we reach a solar minimum. There have been no sunspots for a prolonged period, showing that the sun is lessening in solar activity.

A cooling climate will reduce crop yields, increase food prices, and increase demand. Goods and services will cost more, and the need for products that cultivate agricultural productivity will soar.

In 2011, the Farmer’s Almanac predicted that the quickly fading sunspots indicated that the sun would try to compensate for anthropogenic global warming by lowering its activity levels. Nevertheless, the current solar cycle has run its course faster than expected. Since 2019, there has been almost no solar storm activity, indicating that Earth’s climate will begin cooling.

An extreme example happened in 1645 when the solar cycle stopped for 70 years. This period was called the Maunder Minimum. The Maunder Minimum’s characteristics included bitterly freezing winters, abandoned fishing settlements, and extra icebergs. Since the average global temperatures are warmer than they were in the 17th century, we are unlikely to enter another mini ice age. 

Nonetheless, a drastic drop in temperatures could freeze many crops, reducing the global food supply.

The Problem With ETFs

The problem with using ETFs to track crop prices is that they focus on commodities. Futures back these commodities, and they do a poor job over the mid- to long-term in tracking commodity spot prices.

There are inherent costs of rolling from one contract to another, and the design of ETFs practically means they will decay with time. As such, they are best for short-term trading, unless you want to keep paying fees to the providers.

For more information on tracking food stock prices in the long term, look here.

Benefits of Investing In Agriculture

Farmers are some of the most overworked and underpaid laborers at any given time. Shifting weather patterns could mean they don’t earn much of an income one year.

The best agricultural investments offer stability to the farm infrastructure. By investing in farming, you provide financial aid that improves a farmer’s efficiency and effectiveness. They can buy better equipment, seeds, and fertilizers. The investments help in all stages of farming.

Investing Helps Income Consistency

The problem of inconsistent income is also alleviated. Agriculture is supposedly the recession-proof industry, but a bad economy can hurt a farmer’s paycheck. Investments help them to keep working, even if a natural disaster destroys their crops. With the solar minimum, reduced labor, and agricultural shutdowns, farmers need extra support now more than ever.

Investing Helps Increase the Food Supply

Additional financial support can increase the food supply, allowing farmers to grow ample crops to supply local markets and export to foreign markets. If the deglobalization trend continues, farmers can diversify their plants to feed their home country. A trend towards protectionism can help create more local jobs as more people will need to grow food.

Investing Helps the Land

Agriculture investments can encourage farmers to leave their farmland vacant for a year or more to help the soil restore itself. Healthy soil is more efficient during the growing season, possibly increasing the farmers’ income during the fruitful years.

Since the United States imports much of its produce, American farmers often have to compete with extraordinarily low food prices that would not provide them enough income. With subsidies, they can price their crops competitively while still earning a comfortable living.

Investing Helps You

In terms of your benefits, agricultural stocks give you access to huge companies and provide industry exposure. You can witness high-level trends and see the potential of technological improvements in agriculture.

You can get access to farmland assets or gain exposure to a food processing and production business. If you want to gain experience with a single food type, like grains, you can also get massive exposure to this industry’s trade and logistics.

Purchasing farmland has a potential return on investment, which is incredibly high in developing and emerging areas. The possibility of infrastructure projects, like highways or other government constructions, improves ROI because it increases property prices.

Farmland does not depreciate over time, unlike typical infrastructure investments. Building quality deteriorates, but land stays practically the same, with the exception of natural disasters. You can always use farmland for varying purposes, within legal boundaries.

Investing in funds diversifies your portfolio vastly, be they ETFs or mutual funds. These are excellent low-risk choices, but you will not gain exposure to large-cap stocks.

Drawbacks of Investing in Agriculture

Investing in subsidies can reduce diversity in the food chain. Most available ones do not cover all products, so farmers who need the additional income will need to grow one of the dictated crops. This process homogenizes the food supply and eliminates the advantage of reducing food imports.

Little diversity harms soil quality as it creates nutrient shortages. Crop rotation practices are recommended to most farmers to cultivate soil fertility, but having to grow the same thing to make money goes against this. Farmers compensate with fertilizers and chemicals, but these chemical additives harm the soil further, and they can creep into bodies of water and the food supply. These chemicals may put the environment and people at risk.

Farmers who opt to grow crops not covered by subsidy programs will earn less money and struggle to make a living. Many investments go towards commercial organizations rather than family farms. While most farmers live above the poverty line, they do not receive additional income and are frequently at risk of crossing it. The government usually gives these subsidies to companies that do not need money instead of people that do.

United States subsidies mainly cover corn, wheat, rice, soybeans, and cotton. The country imports other forms of products overseas for their lower costs. 

In cases where someone else owns the farmland, the farmer will not receive the investment, but instead the landowner. The farmer must then pay rent they can barely afford to someone else who earns extra cash from the government.

As far as agriculture stocks go, individual equities do not have all of the protections offered by investments directly in farmland or farming. One benefit of investing in farmland is that it has no correlation to other asset types, so the market will feel a minor effect if the stock market crashes.

Investing in farm stocks is still investing in the stock market, so if the broad market suffers, the farm equity will as well. You are also limited to choose from individual assets, and your stock will often be for just one commodity.

Many agriculture stocks offer a tangential link to the growing of crops, so if you predict that a particular crop will boom in production, you may not receive much financial benefit.

A problem with buying farmland is the high initial cost. In some places, you cannot purchase farmland unless you are a farmer, and it is not easy to convert the land into anything other than a farm. The soil may not be able to withstand housing infrastructure. If farmers who rent your land are unable to yield successful crops, they may not be able to pay you, and you can lose money.

Investing in funds limits you to small-cap stocks so that you will get a low dividend yield. While this is the case for most ETFs, it is especially true in agriculture, especially when compared to private equity investments. Fund investments work best in the short run, but they do not make for suitable long-term investments.

Now you Know How to Invest in Farming, But Should You Do It?

We have covered a lot of ground in teaching you how to invest in farming. Food prices are most likely going to rise dramatically in the near future as we face shortages. In that case, it is best to invest now before the prices rise too much.

Many countries have limited their exports, and the trend towards deglobalization and protectionism means that they may also restrict imports.

The lockdown has had its pros and cons. While on the one hand, it helped protect people from spreading the coronavirus, it also forced labor shortages that harmed the food supply. By not being able to plant in the spring and summer, certain crops will not be grown and harvested during the summer, fall, and winter.

Farmers had to euthanize their livestock because it was too expensive to keep them alive. Crops were left to rot in fields. Meat and produce packaging and processing facilities closed down as there was no one there to run them. The Australian government favored supplying water to cotton fields rather than rice, and now they may run out by Christmas.

Soon, people may have to turn towards synthetic foods as farmers cannot provide adequate supply. As seen by the Chinese seed scare, people are becoming afraid of imports that turned out to be mostly harmless. Countries want to feed only their people, so this is the optimal time to invest in your country’s farming industry.

The demand for food will continue to increase as the populations and prices rise. Supply will struggle to meet people’s needs. While this case is far from ideal, it is a wise investment.

Whether you want to invest in futures, stocks, ETFs, ETNs, REITs, or buy farmland outright, an agriculture investment is a fantastic way to diversify your portfolio. Equities will provide a better investment return, but ETFs are a more suitable choice for a small, short-term income. During this period, farmland is a somewhat questionable purchase, but it is generally a great way to make money.

Because price changes are inevitable, the best investment to make at this time is in futures contracts. You can play price changes for food products without having to be a farmer. 

Bottom Line

The agriculture sector is a fantastic choice for any investor looking to try something new. Agribusiness grows faster than most other markets, and this industry has existed for thousands of years. The market will continue to grow with populations, and rising demand for food means your stock values will increase considerably.

There are many options when it comes to farming investments. While owning a farm is the most lucrative, it requires a high initial investment. Owning a farm-focused REIT will best imitate those returns with a lower initial cost.

If you want more exposure to agriculture, investing in stocks will broaden your portfolio. You can choose to invest in specific commodities, like coffee or cocoa, or invest in something more general, like grains. An ETF has little risk and will provide modest returns. Futures, ETFs, and ETNs will help you profit from changing prices.

You can directly support farmers during this troubling time by purchasing their debt, investing in subsidies, or offering loans. While these methods are less likely to give you financial returns, you will help protect these farmers’ careers and help them support their families.

No matter what, make sure you find an investment vehicle and strategy that works best for you, and consider getting a financial advisor to develop a plan. By making the right investment decisions, you can protect your future with additional income.

We may soon live in a society that is short of real food. In this event, those who have ownership of food will have all of the power. Before making an investment of this caliber, weigh the positive and negative aspects with great care, and make sure it is what you genuinely want to do.

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I hope you found this article on how to invest in farming & agricultural stocks in the best way to be helpful. Please share your own thoughts and experience in the comment section below. Also, please share this with your friends as they might want this info also.

I wish you the best!

Michael, and the rest of the Goldretired team