Investing in Agriculture – Part 1: What Kinds Of Investments Are Available?

Smart-Investors-Series-AgricultureIf the ideal investment is one that feeds continually growing demand, then agricultural investment looks bright.  Experts at Forbes Magazine note that in the last twenty years “the global middle class expanded from about 1 billion people to approximately 1.6 billion.” More importantly, the article goes on to say that it is expected to triple in the next twenty.

With all this wonderful news about agricultural investments, where do you start? Well, like everything else, start at the beginning. Here our Smart Investor Series introduces you to the basic ways you can invest in agriculture.

Like many other investment types, agricultural investments can vary widely in risk, capital requirement, potential return, and the amount of your time involved.

Commodity Futures

Just like futures contracts for precious metals and currencies are traded, so are contracts for soft commodities like agricultural goods from cotton to corn and from orange juice to live hogs. Futures certainly aren’t for the faint of heart, but do allow investors the opportunity to profit from negative price movement as well.

Because of the volatility of the futures market, few investments require more constant attention.

Agricultural Stocks

The stocks of hundreds of agribusinesses are publicly traded. From huge conglomerates to regional suppliers, chemical and seed producers to processors, distributors, and agricultural equipment manufacturers, many investment opportunities are available.

Exchange-Traded Funds

ETFs may contain stocks, futures, or a mix of both. They are, theoretically, an investment approach that allows you to minimize risk and yet profit from overall movement in the sector.

Investment in Agricultural Real Estate

Of course, with huge growth in demand for agricultural products, it stands to reason that real estate like farmland and ranch land is growing in value. While probably true in a broad sense, these investments require as much due diligence as any real estate investment (or more).

You can choose to invest directly in agricultural land, invest through an REIT, or participate in certain specialty funds. Of course if you elect the first, consider what’s involved in management of the property.

Participating Directly

Last, but certainly not least, are investment opportunities that involve not only ownership of agricultural land, but also participation to some degree in the production. Clearly, these are investments that can require significant capital and dedication of time. But, they are also, in some cases, assets that can produce in perpetuity.

Talk To The Experts

It pays to be a smart investor. In this series of articles written by the experts at KerNors LLC, we share all we’ve learned about agricultural investing since we started back in 1924. Call today to learn more.

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