The Agriculture Investment Case
Agriculture in Kenya is not usually thought of as an investment but as an occupation of the rural folk mostly the old. Many youths from rural and urban backgrounds shun this way of life and opt to flock the city to look for white collar jobs which are not there. Furthermore, our universities and places of higher education do not promote agriculture, instead they prepare students to be job seeker and not job creators.
Agriculture today has a compelling investment case…
Fast Growing Population
The Kenyan population is growing very fast – 1 million people per year and growing by almost 3%. Arable land is decreasing due to climate change and conversion into real estate. Demand for food is growing exponentially while supply is diminishing. A basic economic principle here; when demand goes high and supply low, the price will be high.
For instance coffee prices, demand for coffee around the world has skyrocketed causing prices to gain immensely. Kenyan coffee is one of the best in the world and it’s supply is decreasing due to a couple of reasons which will be a blog post for another day.
Kenya imports around half of her food . This ends up being very costly even 2 times the normal price due to the additional expenses of importing, exchange rate fluctuations and what not. This presents a relevant case for investing in agriculture so as to clear the deficit.
We also have a moral authority to feed our compatriots who are which is also enough reason to invest in agriculture. Efficiencies should improve the cost of production making food cheaper for everyone.
The Chinese economy has been growing fast as well as her populace pushing demand of food and agricultural products through the roof. Consumer demand in China has seen a paradigm shift in the last 20 years or so; where it was one of the poorest countries in the world and now it’s one of the richest in the world as develop markets struggle with their debt crises and double dip recession.
Trade between Africa and China stood at USD 10 billion in 2001 and in 2011 it averages USD 110 billion most of this were agricultural-related products. This exhibits a tremendous opportunity to do business with China which is the biggest consumer market as we speak.
Return on Investment of agriculture is perhaps the best compared to stocks, bonds, real estate and small businesses. One has to be very wise though, innovative and you must do your research.
A good example of handsome ROI is that of the brookside dairy farmers. A pure breed pregnant cow costs like kes 150 000/USD 1596. When it gives birth, it produces around 50 litres of high quality milk everyday for 7 months = KES 300 000 within those 7 months = 200% ROI without accounting for related costs. It is very obvious don’t you think; please share your thoughts on the comments section below