How to make farm investment without owning it?

Published on:
May 29, 2023

It may appear wise from a strategic standpoint to be investing in farmland. People still need to eat, regardless of whether the economy as a whole is thriving or in a recession. Due to this, many investors believe that investments in agriculture and farming are recession-proof. Furthermore, farming will become crucial to maintaining international communities as the world's population rises.

However, the typical investor cannot execute the approach of physically owning a farm. A hefty down payment may be necessary to purchase a farm, and maintaining or renting a farm can be expensive and time-consuming. Fortunately, investors have various alternative options besides investing in a farm to acquire exposure to the industry. Let’s get an in-depth understanding of farm investment. 

1. Farm REITs

Purchasing shares of a real estate investment trust (REIT) that focuses on farming is the closest thing an investor can do to simulate farm investment without actually purchasing one. 

Typically, these REITs buy farmland and then lease it to farmers. Farmland REITs provide a number of advantages. For starters, they allow an investor to have interests in several farms spread across a large geographic region, which offers far greater diversity than purchasing a single farm.

Since shares in the majority of these REITs may be swiftly traded on stock exchanges, agricultural REITs also provide better liquidity than owning actual farmland does.

 Additionally, because a minimum investment in agricultural REITs is merely the cost of one REIT share, they reduce the amount of cash required to invest in farmland.

2. Agribusiness Stocks

Investors can choose from a variety of publicly listed businesses that are involved in agriculture. These businesses range from those that directly cultivate and produce crops to those engaged in a number of agriculturally related fields.

3. Production of Crops

Investing in companies that cultivate, grow, and harvest crops is one such option. Many of these businesses also take part in auxiliary tasks including packing, processing, and distribution. 

Associated Industries

Shares in a number of businesses that assist agriculture are also available to investors. Companies that offer seeds and fertilizer, producers of farm equipment, and distributors and processors of crops are three of the primary industries.

  • Seedlings and fertilizer. Investors should research how much of each company's income is generated by agriculture because some companies that produce and sell fertilizer and seeds also provide services to various other industries.
  • Equipment. Because farming requires a lot of equipment, investors may acquire exposure to the industry by investing in companies that specialize in manufacturing agricultural equipment. 
  • The infrastructure needed to transport produce from farms to nearby supermarkets is provided by a large number of businesses. Similar to equipment makers, several of these distributors only make a small amount of their money from operations associated with agriculture.

4. Soft Products

Direct investments in commodities may appeal to more speculative investors who want to profit from market price fluctuations. Even while you may expose yourself to commodities simply by buying futures contracts, there are a variety of exchange-traded funds (ETFs) and exchange-traded notes (ETNs) that offer more varied access to commodities.

Some ETFs and ETNs offer exposure to a single commodity, such as corn (CORN), cattle (COW), coffee (JO), grains (GRU), cocoa (NIB), and sugar (SGG), while others offer a basket of many commodities. The latter includes investments in maize, wheat, soybeans, and sugar futures contracts through the Invesco DB Agriculture ETF (DBA), as an illustration.

How does NAF make a great investment? 

A farm or other agricultural property is a fantastic long-term investment. Perhaps it is unarguable that purchasing farmland is a highly safe alternative for investment! It's a smart investment for you, but it's also good for the next generation. It's easy to explore Nimbus Farmland, one of Bangalore's most well-known farms. The website for it allows you to view all the wonderful advantages it provides.

The conclusion

There are several options available for buying a real farm for those wishing to engage in investing in farmland. A farmland REIT can be bought by investors who want to closely mimic the rewards of owning farmland. 

Making stock investments in crop producers, ancillary businesses, or ETFs may be the best course of action for investors seeking broader exposure to the agriculture industry. 

Additionally, a variety of futures contracts, ETFs, and ETNs are available to investors wishing to profit from fluctuations in the price of agricultural commodities. Investors ought to be able to choose a strategy and investment vehicle that suit their interests with all of these possibilities available. 

Another great alternative to that is managed farmland investment.

Farm Investment FAQs

1. Which Indian farm is the most successful?

One of the most successful agricultural business concepts in the nation is tree farming. Massive demand exists for fruits, but there is also a need for raw wood to be utilized as construction material. If you have a lot of land, you may plant different trees and make money by selling the harvest.

2. Which Indian state has the highest rate of farming?

With a significant state-level agricultural output of bajra, rice, sugarcane, food grains, and many more crops, Uttar Pradesh is India's top farming state.

3. How can I profit from farmland without actually farming it?

Investors may make money from their farm or property in a number of ways without actually working it.
  • Rent, crop gives farmers on your land access.
  • Place billboards on your property.
  • Host wind turbines, solar panels, and cell towers.
  • Harvesting timber for lumber companies
  • Providing heavy equipment and vehicle storage.
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