Let me set the scene: right now, agriculture is one of the largest industries in the world, and with the world’s population rising exponentially, it’s likely to stay that way. But despite the industry being so vast, we consume more than we can produce. We are running out of food and farmers, cultivable land has now become a limited resource, and climate change is causing a huge impact on the world’s harvest, in a mostly negative fashion. Frankly, farming has never been the easiest of professions, and these modern sustainability problems coupled with the constant financial uncertainty about the harvest, revenue and loans, is likely why we very often choose to pursue other professions. For many of us, agriculture was never even an option.
But our global goal towards sustainability and the rising influence of impact investors throws into sharp light the need for investment in agriculture. And if you don’t think this is a viable idea, let me put it this way: human beings need to eat. There will always be a demand for food, which makes agriculture investment a reliable means of hedging and portfolio diversification. Technology and science are improving cultivation significantly and are set to make major leaps in the future. There is also the fact that agriculture has supported the economy and provided jobs (even hired more people) during the COVID-19 pandemic.
That said, not all of us can go buy farms and plough our way to victory. Buying and running a farm requires capital, time, operating expenses and knowledge that most of us don’t have. And so, we must look for alternate investment ideas:
· ETFs – Exchange-traded funds allow your investment to follow the market trend rather than the results of a particular share or company. Not only does this already reduce your investment’s risk, but it also allows you to follow commodities like wheat, cotton and cattle.
· Agriculture Shares – You can choose to invest in companies selling tractors, fertilizers, seeds and any other product or service related to farming. Demand for these products will last continually, simply because the demand for food is growing and everlasting. This makes it a fairly risk-averse investment. If you’re feeling adventurous, biotech investments are quite popular right now (and also riskier).
· Agriculture derivatives – Also available on the stock exchange, these investments are often used to hedge and diversify portfolios. You can also choose to speculate on the asset and hope to profit from any price movement. The stock exchange allows for both Future Contracts and Options Contracts.
Impact investing in agriculture is a small way towards cultivating change positively. In a way, we are investing not only in our financial future but also towards the health and sustenance needs of the world to come.
Related: Alternative investments in bees