Investing in agriculture is not only a safe investment - your investments have a real impact in the modernization and growth of small and medium farmers that grow the food that gets into our tables every day.
And yes, not only is it a safe investment but also one with a high-yield.
Sounds like a bold statement? Well, we are not traditional banking, so we do not discard farmers when financials do not match our optimal models. We actually talk to them and gather all the necessary information to have a solid picture of each context and to understand the viability of the financing. More often than not, that places our loans in the riskier side of the market standard and the interest rate reflects that, consequently impacting the investment yield.
This higher yield is a premium for going out of your way to have the impact that traditional financing is not willing to, blindfolded as they are in their comfort zones.
But let’s dig a bit deeper on why you should start investing in agriculture today, even if you are a beginner without a bag of money to start with.
Agriculture is a vital sector and that is not supposed to change anytime soon.
The strong familiar culture of inheritance and tradition of grooming the successors to take over the activity, on an almost perpetual father to daughter or son continuity, ensures the unique stability of this sector.
The generational renewal means that there are always young farmers eager to invest and apply new and modern approaches to their farming activity.
Furthermore, agriculture is usually heavily subsidized by governments and the European Union.
European Commission and European Investment Bank in their Fi-Compass report pointed out a positive view of the agriculture sector due to the overall high level of solidity and low level of default risk. These are the main reasons why the agriculture sector is considered a good portfolio investment for those who are looking for safe asset classes.
While subject to specific risks, like fluctuating profit margins and cash flow due to seasonality, and weather-related fluctuations, this sector is more resistant to economic fluctuations that heavily affect other sectors. But even when considering these risks, keep in mind that government support helps farmers to stabilize their losses and the growing demand for production keeps the sector very alive.
Food prices historically increase over time due to the growing demand for food. The United Nations projected that the world's population would grow to reach 8.5 billion in 2030 and 9.7 billion in 2050. Therefore, it’s predictable that the demand for food will continue to grow as well.
The main question is: “Will farmers be able to meet this increasing demand?”. To do that they have to either expand the land plots for agricultural activities or enhance productivity on existing agricultural lands with new, more efficient farming methods, and modern processes.
Since the increase rate of the farming land is too slow to meet the forecasted demand for food, and overall not sustainable for the biome balance of the planet, the focus is set on agriculture modernization. Advanced logistics, transportation, storage, and a local production approach are crucial factors to ensure the viability of food arriving at your table.
Modern technologies offer good solutions to improve the agricultural processes, however, farmers still face ignorance from traditional financing institutions while seeking funding for modernization.
This is where HeavyFinance steps in to be an alternative solution for farmers to implement their modernization plans and provides investors an opportunity to earn while contributing to the development of the agriculture sector with their investments.
Having more opportunities to receive funding and attract investments, farmers are not only able to grow the crop cultures that will help them to survive, but also incorporate new cultures, some that were not previously suitable to be grown in their climate conditions. The wide variety of cultures grown on the farms also benefits investors - this diversity decreases the probability of losses caused by weather conditions. If one crop culture does not bring an abundant harvest during the season, most likely the farmer will still be able to earn enough to be profitable by selling other kinds of crops.
Organic farming is slowly establishing itself as the future of agriculture. Organic and sustainable food production are getting more and deserved attention from the public as well. This dynamic leads to the increase of organic food options found almost around every corner.
Modern and certified organic agriculture, to this day, is practiced in 187 countries with 72,3 million hectares of agricultural land. Authorities understand the impact and importance of the changing consumer and producer habits - there are extensive government-supported projects that incentivize farmers to incorporate more sustainable farming processes.
However, due to the scale and the granular nature of these changes, governments are simply unable to fully support the modernization efforts of their farmers, who in turn need to look for additional funding elsewhere.
Because organic farming usually represents a breakaway from the common farming processes of the past decades, it is more popular among young farmers that are planning their activities with new concerns and a renewed sense of purpose. And because they are usually starting or restarting these activities, they face hard obstacles to receive funding from traditional financing institutions, due to the smaller size of the farmland they manage and their short financial history.
This lack of financing products for agriculture creates a financial gap that is estimated to be 19.7 – 46.6 billion euros according to Fi-Compass.
HeavyFinance, as an alternative financing provider to farmers, plays a role in closing this gap.
As an investor, you know the importance of diversifying your portfolio. The good news is that you can also do that while investing in different projects on the HeavyFinance platform. Over the year we have listed more than 200 different loan projects, to collect funding for farmers in four countries.
HeavyFinance investors financed from crops and livestock farmers to beekeepers and winemakers. Since agriculture as a sector is vast and composed of numerous different activities, investors diversify their portfolios simply by investing in different loans on our platform.
HeavyFinance, as an intermediary between farmers and investors, offers an easy process for safe and high-yield investments.
Not only most of our loans are backed by a primary pledge of agricultural land, heavy equipment, receivables from future sales, and individual state guarantees, but we also put in the necessary effort to find the right projects and present them with the relevant background stories, context, and comprehensive risk assessments.
Explore loan projects available on HeavyFinance and join our constantly growing investor community.