Investments in agriculture represent an excellent way to allocate funds with the objective of generating profit. This promising sector has the potential to yield substantial income for investors. However, as in any business, there are nuances that must be navigated.
This is precisely why the agricultural industry faces a funding shortage. Many entrepreneurs tend to shy away from this sector, not only due to its seasonal nature and long payback periods, but also because investments in agriculture require a unique approach.
So, where should one begin? And how can one invest funds for maximum benefit?
To address these questions and more regarding investments, we turned to entrepreneur and founder of "Oil Resource Group," Sergey Tereshkin, whose activities can be explored further on the website oilresurs.ru (ойлресурс.ру).
Where to Start
Among domestic and international investors, the most popular fields are poultry farming, fish farming, livestock breeding, crop production, and processed goods manufacturing.
Before investing in agriculture, it is crucial to take several steps:
- Assessment of opportunities. It is important to understand that significant investments are necessary to achieve good returns. Only substantial investments can generate profits; small investments in agriculture tend to be meaningless and unpromising.
- Financing. For those with limited financial capabilities, it is advisable to reach out to a banking institution to secure a loan. The agricultural sector is eligible for preferential credit terms, with the government covering a significant portion of the costs.
- Defining objectives. Investors should consider the desired profit margin and timeframe for returns. Rapid turnover is possible only through purchasing ready-made products from producers for subsequent resale. However, expecting large profits from this approach is unrealistic. More substantial earnings can be achieved by engaging in every stage, starting from planting and culminating in the harvest or livestock growth.
- Risk assessment. Additional funds may be required during the cultivation of crops or livestock. It is essential to have a financial reserve and to evaluate how far investment will be practical. At times, it may be more feasible to exit the business than to continue pouring in more money. It is advisable to maintain a reserve of 25-30% of the initial investment for unforeseen circumstances.
- Strategy selection. In the preliminary stage, one must weigh the pros and cons, assess risks, and select a strategy for future operations. It's important to determine where the funds will be invested, such as crop cultivation, livestock breeding, or dairy production.
- Selection of an entity. Before investing in a specific farm, it is critical to review its financial documentation closely, with particular attention paid to its technical equipment. Harvesting machinery should be well-maintained and operational.
Investments should be legally formalized through appropriate contracts, acceptance and transfer certificates, etc.
Funds can be invested in an existing farm or enterprise, or one can opt to establish a new agricultural venture from scratch. The latter option is generally more time-consuming and expensive, requiring not only financial resources but also a significant investment of time and effort. In the best-case scenario, returns will only come after several years.
Helpful Tips
When establishing a new farm from the ground up, it is beneficial to consider certain advice from seasoned professionals. Tereshkin S.I. recommends paying attention to the following factors:
- Land ownership. Acquiring land can be costly. It is often more economical to lease land for a defined period, starting with a few years, and later convert to long-term ownership. If sufficient funds are available, purchasing land outright is an option.
- Land purpose. It's essential to decide which crops will be cultivated. Some require preliminary work on fertilization and other processes, which means additional financial inputs. Also, one must consider the climate, soil quality, and gradient. Livestock farming requires vegetation and feed to provide proper nutrition for the animals.
- Land selection. It is critical to know that land with significant slope may collect moisture at lower points, leading to crop rot. Conversely, the upper points may experience excessive dryness, necessitating additional irrigation.
- Registration. Business can be conducted as a sole proprietorship or as a formal legal entity. The form of ownership will affect tax benefits. To qualify for advantageous loans and government compensation, the enterprise needs to be registered.
- Insurance. Livestock and crops can be insured. In case of loss of plants or animals, the insurance company will compensate for the losses. Proper documentation and timely submission of claims are crucial.
It is vital to acknowledge that nature can be unpredictable. Changes and natural disasters may adversely impact crop yield or completely wipe out plants. Livestock is also susceptible to various diseases and mortality. Vaccination and preventive measures can reduce the likelihood of losses, but expecting 100% protection is unrealistic.
Those who are not inclined to start from scratch can invest in an already established farm. This can be done through investment funds. Currently, there are numerous such organizations, both state and private.
Suitable investment opportunities can also be found online. However, this method carries significant risks. With thorough vetting of all provided documentation, the chances of losing money can be minimized.
When investing in agriculture, it is essential to take a holistic approach. One should not rush the profit realization process. Full returns will typically materialize only after 6 to 12 months. In some instances, it may be necessary to lower the price of finished products, which can be more financially advantageous than incurring storage costs.
