Agribusiness Investments

Submitted by Share Trading on 23 February, 2010 - 13:43

The term agribusiness investments refer to investments in various agricultural sectors including timber and wine. In the case of agribusiness investments, an investor grows crop and the cost involved with it (which includes the expense of establishment and ongoing expenses) is normally considered as business expenses which are tax-deductible against other earnings. The earnings that a crop grower generates through the sale of the crop are considered as assessable income.

Benefits of investing in Agribusiness

Usually many financial advisers and accountants focus on the agribusiness investments when a tax year is closing towards its end in an attempt to diminish the tax payments for their clients. Some people believe that this type of agribusiness investment keeps getting better and better as long as the tax deductions are taken under consideration.

Those who are looking for tax deductions can consider buying either geared or agribusiness investments. Say for example, if you invest about $200,000 into a geared investment for an annual interest of 10%, then this can allow you to claim $20,000 as a deduction for your tax return for that year. However in case of agribusiness investments, the total expenditure involved with the project is considered potentially tax-deductible.

Agribusiness investments are capable of offering diversified investment portfolio since they are not correlated with cycles like stock market or property. From the perspective of accountants and financial advisers, the tax benefits involved with agribusiness investments is a potential selling point as they are the major channels for the advertisers who are looking forward to source alternative business opportunities.

In case of geared agribusiness investment, to get a decent-sized tax deduction you will need to borrow a considerable amount of money. In some cases, an investor may require to borrow as much as $1 million for his/her investments in property or stocks in order to secure a tax deduction from an agribusiness plan which is equal-sized.

Agribusiness Investments - Some Things to Take Under Consideration

However, some critics argue that the financial advisers does promote the agribusiness products to their customers for other reasons as well which includes lucrative incentive offerings and commissions for them.
Another key issue that the investors often worry about is the uncertainty involved with the agribusiness investments and the lengthy procedure. For instance, an agribusiness scheme that involves planting, maintaining, harvesting, woodchip and exportation of a timber plantation can take considerable amount of time to be completed and the investors do not get their money back until the whole procedure is finished.

Uncertainty is a common factor in this sector where natural calamity, disease, drought along with the instability in the market due to cost and price can cause significant drop in the returns of an investor. Some advisers show less interest to promote agribusiness investments to their clients because of the risks involved with this sector which is higher in comparison with the stock market and property investments. In addition to that, this sector is still to be thoroughly researched.
Therefore, a person who is planning to invest in the agribusiness sector should have a proper understanding about the risks that are involved with it to make up his/her mind whether to go for this sort of investments.

Agribusiness Investments - Chances Gets Better with Experience

Despite the fact that it is not possible to asses the future risks but commodities like wine usually provides better outcome in comparison with some other commodities like woodchips. In addition to that, managers who are well established in agribusiness investments are usually more capable of dealing with the future risks in comparison with those who are not that much experienced.
When it comes to investing in an agribusiness scheme, the items that boost the chances of a manager to get the best out of the business include:

  1. A product that already has demand in the market,
  2. An impressive profile, and finally
  3. A product ruling from the tax office
Glossary List

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