How Profitable is Owning A Small Farmland
My country has been experiencing food price increase and this led me to begin agriculture at least in a small scale until I am able to scale up since I have to purchase the land before I start farming. In my quest, I decided to look into people who have invested into Agriculture and farmland recently, and I saw that a lot of Billionaires and investment companies.
From Bill Gates with 250k Acres, to Hancook Agricultural Investment Group with over 400k acres, John Malone with 2.2M acres and many more. So the question that comes to mind is why are they all investing in farmlands? So to critics, these billionaires and investment companies are actually pushing the small family farmers out of business while you would expect advocates to say that it is propping up the market.
Some people are able to farm their lands by themselves, in fact this is the most common type of farming since majority of farmers are small farmers, some people decide to rent their farms to other people before they prefer to get passive income from the farmland rather than tilling the ground themselves. While some people rent this land directly, other type of rentals are institutional agricultural real estate investors like Tyson Foods, and Cascade Investment Group, INC.
If you are going to get tremendous gains from farming, then it has to do with scale because a small family farm of 100 acre will cost the same fixed cost as 10,000 acres farmland which is for commercial purpose. Even when they have the same fixed cost, the larger farms have access to better loan facility, cheaper seeds, and other things.
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As offices and buildings are to investors, so are farmlands to them. We all know that we will classify farmland as a real estate and this real estate is the deal for investors because even when businesses are closing down and firms are not making profits, farm lands continue to be operational because people have to eat food. For investors, the farmland is just a collateral to get loans while the profit from the farm helps them to pay the loan back thereby allowing them access to funds to be able to invest in other business.
With this, I begin to ask myself if agriculture is really profitable for small farmers since over half of farmers report not making profit on their farm land. So what is my faith? I do not know for now but time will tell. I will be able to share my experience with you all when I break even or begin to make profit because I still need to account for a lot of assets and spending on the farmland till harvest.
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