Owning a small parcel of land with no idea on how to use it? Agribusiness might be your best bet. Agribusiness is a form of farming activity where one engages with the sole purpose of earning good returns. Agribusiness is popular in rural Kenya. No matter the size or parcel of land you own, you can still make a thriving farming business out of it, whose benefits will stand out.
Agribusiness entails more than just agriculture. It is the entire value chain. It is easy to just think of agribusiness as the farm, but it is the whole chain and all the supporting services like transport companies, fertilisers, consultants and many more.
According to data from the World Trade Organisation, in 2018 agriculture exports accounted for an average of 17 per cent of total merchandise exports across 94 countries around the world. In countries such as New Zealand, this figure goes up to 72.6 per cent.
The agricultural sector is the backbone of the economy, contributing approximately 33 percent of Kenya’s Gross Domestic Product (GDP). The agriculture sector employs more than 40 percent of the total population and 70 percent of the rural population.
As long as one is ready to roll up their sleeves and be patient, agribusiness has good returns. For a viable agribusiness, ensure that:
- You know your target market
- Have a good strategy and plan well in advance
- Have good land management and practices
- Be persistent and focused
- Have a ready cash flow
- Understand your minimum production level
- Know which crop performs well in the areas you have a plot or shamba.
Before considering an investment or getting personally involved in this industry, it is important to look at the key pros of agribusiness so an empowered decision can be made.
What Are the Pros of Agribusiness?
1. It is an alternative asset class.
Agribusiness provides income, plain and simple. It also provides a solid income source for individuals who work within the industry. There is a low correlation to assets that are in the mainstream, such as equities, fixed income, and property, so what you see is typically what you get.
2. It provides something that people always need.
Challenging seasons may make for the best investment opportunities because there is one rule all humans follow: we need food to eat. Whether it comes from livestock, grains, or vegetables, changing weather conditions or even dietary fads can make this industry look attractive.
3. There can be certain tax benefits.
Some income from agribusiness may have certain tax benefits for workers and investors. Ofcourse getting involved in this industry shouldn’t be for tax purposes alone, but there is the potential to make more wealth per capita in this industry than in others.
4. It allows for diversification.
The best kind of portfolio has income sources from multiple sectors. Workers who are able to perform in multiple sectors have the best chance for employment. Agribusiness allows for both.
5. A hard day of work creates a tangible result.
It can be difficult to feel like something has been accomplished with certain jobs today. In agribusiness, you work with your hands out in the fields, pastures, and facilities and know that you’ve made a positive impact after a hard day of work.