Buying a farm- the financials risk vs reward

I’ve recently moved out of the big smoke of Auckland to Te Puke for work in kiwifruit packhouses as a Coolstore manager.

Being more “rural” I’m surrounded by farms and orchards on the drive to work or around town. I studied horticulture and agribusiness at uni so have always had an interest in the sector and I’m doing research on the possibility of owning a farm or orchard one day.

Running the figures it looks like dairy and sheep/beef farming are only returning a 5-6% return on capital and kiwifruit much better at around 9-10%

Let’s say rural land goes up 4% a year and you are left with 9-10% and 13-14% returns respectively.

I can’t figure out for the life of me why someone would invest several million dollars and take the risks with pests, diseases, freak weather and be tied to the land 365 days a year for those returns. These are huge devastating risks in my opinion and the rewards don’t warrant it.

Why not just park the money in the sharemarket, kick back and enjoy market returns of 10-11% a year all whilst getting a pay check from others? I’m really baffled from what the figures are telling me.

Last i heard kiwifruit gold was selling for a cool $1million a hectare,guessing land price increases may be more than 4%, depending on ones timing in the cycles.

If you get tempted
https://www.nzherald.co.nz/business/...ectid=12108188

If you're capable of doing well out of the sharemarket, this type of business would not be worth pursuing in my opinion. Plus, the long-run returns are going to be lower than the figures you may be seeing now.

I did a small amount of research into this and came to the same conclusion. My guess is that is an inherited way of life.

The only way i could see it as a valuable investment is if it were near a fast growing city, and you could make the land pay its way until it was changed from rural to residential $$

i thought it was pretty common knowledge that farming is simply land-banking, with production only there to pay the running costs. ;)

possibly other horticultural endeavors that will produce a higher yield. I've seen a number of Dairy farmers diversifying a small portion of their farm into fruit/stonefruit/berries, but is fairly capital intensive to get scale.

Insects as livestock for animal and human feed
"Insect farming produces a fraction of the environmental damage of cattle and other traditional meats. No farmed insect species (except termites, but **** them) produce methane gas, and compared to cattle, farming crickets produces 5 times more meat per kg of feed consumed, and 100 times less greenhouse gases. On top of that, insect farming uses way less water and produces way less agricultural waste than beef farming."
Insect farms gear up to feed soaring global protein demand | Reuters
The 3 Largest Insect Farming Start-ups in the World - Ento Nation
Eat a locust, save a cow: The Dunedin farmer raising insects for us all ...