Investing in agriculture may seem like a smart strategic move, after all everyone needs food, right? And as the population grows, so will the need for food. However, even if farming is your passion, purchasing land may not be the greatest decision for you. Land prices have risen progressively in recent years, making it harder for small farmers and first-time buyers to get started.
Fortunately, there are several alternative ways to invest in agriculture without owning a property. Hydroponic farming in India is a simple option. Hydroponic farming is a form of agriculture in which plants are grown without the need for soil. Instead, they are cultivated in nutrient-rich water.
In this post, we will look at some of the options for investing in farming, as well as the benefits of doing so.
Hydroponic farming is a method of agriculture in which plants are cultivated in water and nutrients rather than soil. This agricultural system has several advantages, including greater yields, lower water consumption, and little to no pests or diseases. Hydroponic farming is also perfect for metropolitan settings with limited and expensive land.
There are several ways to begin hydroponic gardening without owning property. Joining a commercial hydroponic farming enterprise is one alternative. These companies have the infrastructure and knowledge to get your crops off to a good start. Another option is to establish a hydroponic partnership with another farmer or company.
This may be an excellent way to share costs and resources while also learning from the experiences of others.
If you do not want to grow your own hydroponic business, you can invest in an existing one. This can be a great way to get started in the field without having to deal with the difficulties of running your own business. There are several commercial hydroponic farms searching for investment. These companies often have a strong business plan and a proven track record, making them a secure investment.
It is critical to conduct thorough research before investing in a hydroponic farm. Make sure to properly investigate the firm and ask questions about its operations.
Real Estate Investment Trust
A Real Estate Investment Trust, or REIT, is a great way to invest in farming without owning any land. Farm REITs are a subset of real estate investment trusts that hold and operate farms and other agricultural properties. Instead of buying land or a farm, you may purchase shares in a farm that is leased to tenants. Each REIT will have exposure to a certain sector of agriculture.
The primary benefit of investing in a farm REIT is that it allows investors to diversify their portfolios and gain exposure to the agricultural asset class without dealing with owning and maintaining a farm.
Investing in agricultural commodities is another option to gain exposure to the agribusiness without owning any land. Agricultural commodities are raw resources used in the manufacture of food and other products. Corn, wheat, soybeans, rice, and livestock are all examples of agricultural commodities.
Agricultural commodities can be invested in exchange-traded funds (ETFs) or commodity futures contracts. ETFs frequently minimize the risk of investing in volatile commodities markets while growing exposure. Product futures contracts are agreements to acquire or sell a certain amount of agricultural commodity at a specified price and date in the future. These contracts can also be used to hedge against rising prices or to experiment on the market direction.
Farmers have traditionally had difficulty raising funds. Small farmers may find it difficult to get started due to the high cost of land and pricey equipment. Farmers, on the other hand, can use crowdfunding to raise funds from a group of smaller investors. As a consequence, investors may diversify their portfolios by include farming.
Agricultural ETFs (Exchange Traded Funds)
Agricultural ETFs (Exchange Traded Funds) are mutual funds that invest in a basket of agricultural commodities or companies that produce food and other goods. You will enjoy the benefits of diversity and liquidity as with any other ETF. You do not have to pick and choose which companies or commodities to invest in with an agricultural ETF. The job is done for you by the fund manager. Agricultural exchange-traded funds (ETFs) are a great way to obtain exposure to the farming industry without having to deal with the land ownership of the hassles.
Agricultural mutual funds
Agricultural mutual funds hold a portfolio of companies that produce food and other goods. Diversification and professional management are available, as they are with any other mutual fund. However, it is crucial to understand that, in addition to agriculture, many of these funds have exposure to other sectors.
Before investing in any mutual fund, investors should think about things like fees and performance history. While agricultural mutual funds may not provide the same amount of exposure as agricultural exchange-traded funds (ETFs), they can still be a good way to gain exposure to the farming industry without needing to own property.
Investing in land is complicated by factors such as land availability, location, good water supply, power, and other basic necessities. All of these factors contribute to the high cost of purchasing land.
While farm REITs, agricultural ETFs, mutual funds, and crowdfunding can be used to invest in farming without owning land, these instruments are risky to their reliance on stock markets. Hydroponic farming, on the other hand, is a completely risk-free choice. It has several advantages, including increased yields, year-round production, and lower water consumption.
First published on: 09 May 2022, 05:45 IST