Investing and Business with Food: Farming, Passive Investing, Food Trade and Storage
Just 8 years ago when starting this site I couldn't imagine that food is going to become such a hot topic. Tasty topic. And promising investment opportunity. But wait. It has always been. It's just that we all are starting to realize this a bit late.
What am I talking about?
People have been "investing" in food for ages. For many centuries food producing has been the main source of income for the main part of the population. Now things has changed. But you can still invest in food and make really good profits. Want to hear several ways to do it?
Small Farming, Micro Farming, Managing a Farm, Or Growing The Food Yourself
The simplest way to invest small amounts in food is to just start a micro farm. It's a viable business opportunity and is getting more and more popular even among people who lived all their lives in cities.>
Of course, microfarming is far away from passive investing. It falls somewhere between business and job. Depending on how you plan to handle it and how much funds you have for investing it may involve plenty of hard work.
For sure if you choose this path there is a lot of (exciting!) things to learn. There are plenty of resources, ebooks and blogs on the topic.
There is practically no minimum investment in microfarming. You can start on your home backyard or on a small family plot. You can even grow some herbs and vegetables in containers on the terrace or in aquaponic system in your basement. If you have to buy some land, you can often find a small plot for farming for less than $1,000.
Exciting, but to stay on Earth let's focus on the things you should plan or think about:
- Market. Start with this first. Where and to whom you are going to sell your produce? Are you going to sell raw or are you going to add some further value by producing jams, dry fruits and veggies and so on? Are you going to sell your produce yourself (then who'll work on the farm?) or are you going to hire someone? Don't start until you have a very basic business plan.
- Work. Microfarming means a lot of physical work especially in the beginning. If you have passive investor mindset you may need to think about hiring someone to do the actual work. And then you have to do the math - it may work or may not. If you plan to work yourself, do you have the time and physical abilities?
- What food to produce. You may produce whatever comes - mixed stuff, vegetables and fruits etc, or you may prefer to specialize in producing certain herbs for example, a specific fruit, honey etc.
- Short term growth plan. If you just want to run a lifestyle business maybe you will not need to grow much. But if you plan to move away of the work in the future and grow the investment into bigger business, you'll have to plan for it. Is there a good land to purchase nearby? Is there a market for further growth? There are a lot of questions to ask yourself.
Microfarming is not the typical investment we use to talk about on this site. It's a lot more work and business than investment. And you have to find it at least a bit tempting - farming is not for everyone.
Passive Investing in Food
Ok so far, so good. Maybe you aren't one of those people. Maybe you don't dream to have your hands dirty and watch tomatoes grow. That's fine. We are here to talk about investing. How does one invest in food passively?
- Owning land. I know this technically classifies as "investing in land". It's actually the same. Investing in agriculture land means you invest in food. You don't have to work on the land. You don't even need to know how it looks or where exactly it is located. You can buy land and just collect payments from the farmer who rents it. This is super easy and super passive investment opportunity. And often you can start with less than $1,000 because agriculture land is not as expensive as land for construction for example. The major downside however is the ROI: it rarely beets the bank rates and even more rarely beats 10% per year. So here you go - low risk, low reward.
- Investing in long lasting food. The price of many food related products grows every year and grows a lot more than the inflation or the bank rates. So if you buy large quantities of such products you can make good profits. Even if you don't sell them but just use for yourself. You only have to buy food that does not spoil and store it properly. Such products are honey, tea, coffee, wine, rice, some pickles etc. Obviously you are much better storing tea rather than rice because of the higher price of tea per volume - so you'll need less storage space. But you also have to check the price history of these products and see which prices constantly grow with a high rate. Don't forget there are some expenses - keeping storage space clean and with appropriate temperature etc. For more info about this type of food investing see also this and this post.
- Investing in food stocks. Of course you can turn the whole thing into yet another entirely paper/electronics based activity and just buy some "food industry" stocks. Don't expect them to perform much better than any other financial stocks.
If you are more a trader than a long term investor you may want to think about food trading. There are basically two ways you can trade with food. OK, there are many more, but two main ways:
- Physical trading with food. This means again running a business rather than being a passive investor. You can trade food in many ways. You can buy from local producers and sell on the market. You can operate a food truck. Or you can buy large quantities and transport them with ships. It all depends on the money you have to invest and how much you are willing to risk. This is a business that can be started with as little as few hundred dollars, or may require millions if you want to move ships around. In any case, this is a business and requires work.
- Food futures. Alternatively you can become a trader with food futures. This means you will not have to store any food locally. You will trade contracts based on the future prices on food and hopefully earn money if your expectations are right. This activity is quite similar to stock trading. To learn more about food futures, click here.
The purpose of this post is to introduce all the possibilities to you and get you thinking. It can't cover all the aspects of investing in food. So, be prepared to learn a lot more. Here is a good book for a starter.
Published at Jan, 10 '13 , Read 4210 times.
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