Is Agriculture a Risky Investment?

As in all investments, the more you know, the less unexpected risks come to light.  And when you expect a risk, you can nullify it.

The obvious risk in agriculture is the weather.  For non-farmers, the weather can be a tricky customer, fraught with difficulty and just waiting to ruin all your investments.  But weather is all about timing.

I love salmon fishing, with a fly.  Wonderful sport with a very tasty result.  We hear stories of people spending days on the river and coming home empty handed and empty wallet.  You see, the salmon is a child of the weather more than anything else, and salmon fishing is more about the weather than any skill with rod and line.  When the river is high, the salmon runs, and when the rain stops and the river falls, there comes a point when the salmon is irritable and will take any fly it sees.  This point does vary from pool to pool, so you need watercraft as well, and a barometer, because the pressure also affects the fish.  Nevertheless, armed with this knowledge, the savvy angler knows when to be on the river bank and when to sit in the pub.  But the time will come.  You must recognize the moment.

So it is with farming.  The weather is generally predictable, the variations affect the timing of harvest and the yield.  This can be made up with fertilizer and irrigation, all of which come at a cost, which can outweigh the labour costs of organic farming.  But the correct time for harvest will come.  For the savvy farmer knows when to plant and when to harvest.

Yet all of this is relatively immaterial.  For what matters is the market, and the price of your crop when it is sold.  You may worry over a poor yield, but this is the same for everybody, so the price will go up.

Get it right, plant the crop that is in demand at harvest, and you will make a lot of money.  Get it wrong and you will cover costs.  Just…

Of course, catastrophic drought, flooding or wildfires are a different matter, but these are risks that should be taken into consideration before land is procured.

No, weather is not a real risk.

The biggest risk to agriculture is that many of the crops, which appear at first glance to be an excellent business proposition from the regular demand, are too important to a country and politicians step in.  Suddenly, the price you get for your crop is no longer subject to market forces, but to the whims of politicians wishing to be re-elected.  Yes, they want to keep the price of your crop down.  Right down.

So, rule number one in Agricultural Investments.  Do not invest in a crop that is influenced by politics.  There are exceptions, mainly not very ethical.

What should we look for where the risk is reduced?

A constant, regular demand for the crop is the prerequisite.  Of course, existing farmers will be doing their best to supply that market and make no mistake, farmers are a clever bunch of people who know what they are doing.  Is there going to be room for you or the company in which you invest?

But savvy investors are not just looking to reduce risk.  They are looking for opportunity with a serious upside.  And here agriculture and in particular plantations come up trumps.

We touched in a previous article on fashion, by which we mean demand. Coconuts are an unfashionable crop, despite a growing demand for coconut oil.  The same applies to rubber.  But we must not look to the past except to learn from history.  We need to forecast the future.  Will Palm Oil die a death from the pressure of the Green Lobby or will continual demand from China and India keep it going?  Will rubber make a comeback with the demand for latex gloves or is this temporary?  Essential oils are a growing market; will it be sustainable?

Royal Spice Gardens Indonesia selected vanilla as our first crop not just because it is very profitable, but also because there is something missing in the Indonesian vanilla, which must be rectified for the country.  After decades of abuse from powerful individuals and protectionism from other countries, Indonesian farmers are just emerging from a misunderstanding of market requirements which has resulted in Indonesian vanilla having a poor reputation.

We can solve this issue, create high value vanilla and demonstrate what we do, all for the benefit of the country.  While making serious money and improving the name of Indonesian vanilla.

Our second target crop is Agarwood and the Oud oil that is derived from it.  Here we have a big conservation angle, because Agarwood is becoming endangered in the wild from harvesting, so creating plantations of it saves the trees.  We also extract the oil instead of shipping the wood overseas…  From a conservation standpoint, we don’t like monocrops, so the more crops we have, the easier it is to intermix the trees.

These are typical of good target crops for investment.  Where the investor can make a difference in the production.  Other crops that we may consider include cashews, banana flour, essential oils, cacao, pepper, nutmeg and other spices.

I would like you to leave you with one last thought on plantation companies.  The bedrock that built the British Empire.  Have a look at the stock markets.  Scroll through the classifications till you come to Plantations.  Most stock markets have them as a separate classification.  You will find them cash rich, land rich and conservative, making a steady return through stock market crashes…  Syme Darby is one of the biggest companies in the world.  It owned the land on which Kuala Lumpur was built…

If you would like to know more, please go to and have a look at our prospectus.

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