When thinking about agriculture investments, there are several important factors to consider. Below is a brief outline of necessary items to address before making the jump.
Recognizing opportunity
As a step zero, it’s important to conduct a feasibility study starting with analyzing global supply and demand and identifying gaps in the market. Zooming in, a risk analysis of the suitability of the land of interest will reveal the potential up (or down) side of the venture. This will typically require technical expertise and several site visits.
Capital investment
Almost as a second part of the feasibility study, is understanding at what scale does the operation make sense for all stakeholders. Different than operating a personal farm, a for-profit farm relies on heavy equipment and intricate irrigation systems designed to optimize productivity year or over. This has a large cost in addition to purchasing the land which will likely be in the possession of the corporation. However, an important factor to consider is that the land is surrounded by experience farmers who have similar tools and infrastructure at their disposal. This allows for mutual aid and support whether need material or intellectual support.
Generating profits
Before making a profit, the fundamental goal is to fulfill the demand. Meeting that demand may happen early on, however, the point of the venture is to receive a return on investment within a reasonable time frame. Hence, it’s important to not just project when the fruits of labor will be reaped but other competition or risk that may cut into the margin. If in the context of an olive oil business, one should research what methods are his competition deploying to remain ahead and adopt as soon as possible to stay in the market.
