The Hidden Costs Affecting Farming ROI (2024)

FAQs

What are the hidden costs of agriculture to the environment in terms of natural resource degradation? ›

Fertilizers, pesticides, and leaks from factories and landfills can pollute both soil and water. Pollution can lead to land degradation, making it difficult or impossible to grow crops.

In business, the term Return on Investment (ROI) refers to capital spending and the return expected from those assets or projects. But in practical farmer-speak, it often means the increase in yield and revenue expected from adding a particular product or practice to their crops.

Fertilizer, labor, and technology are the leading factors driving up input costs. According to the United States Department of Agriculture, input costs, including fertilizer, fuel, land, machinery, and labor, have increased by 28% since 2020, totaling more than $100 billion.

Feed, at $83.6 billion, was the largest expense item, accounting for 18.5% of farm expenditures. Feed (up $18.4 billion), fertilizer, lime, and soil conditioners (up $7.3 billion), as well as labor (up $4.8 billion) were the three categories with the largest increases between 2021 and 2022.

Industrial farming is bad for the health of workers, eaters, and downstream neighbors. Here are some of its costly health impacts: Pesticide toxicity. Herbicides and insecticides commonly used in agriculture have been associated with both acute poisoning and long-term chronic illness.

CAFOs create costly air and water pollution. Even with EQIP subsidies, CAFOs do not effectively manage the enormous amounts of waste they produce. Manure is often handled, stored, and disposed of improp- erly, resulting in leakage, runoff, and spills of waste into surface and groundwater.

Return on investment (ROI) is calculated by dividing the profit earned on an investment by the cost of that investment. For instance, an investment with a profit of $100 and a cost of $100 would have an ROI of 1, or 100% when expressed as a percentage.

To sum up, return on investment or ROI, is a key idea in agriculture that sheds light on how profitable farming operations are.

What one investor considers a “good” ROI might be considered “bad” for other investors. A “good” ROI is highly subjective because it largely depends on how risk-tolerant a particular investor is. But as a rule of thumb, most real estate investors aim for ROIs above 10%.

Feed, at $80 billion, was the largest expense item, accounting for 16.6% of farm expenditures. Livestock/poultry/related expenses (up $10.7 billion), labor (up $6.4 billion), as well as farm services (up $5.3 billion), were the three categories with the largest increases between 2022 and 2023.

What is the most profitable to farm? ›

Dubbed "red gold", saffron's high market value makes it arguably the most profitable agricultural crop. Though it requires careful cultivation, the potential profits per acre are unmatched, highlighting its viability for small farms looking to maximize their earnings.

Feed costs were the largest overall driver of higher expenses, up 18.5% from 2021. Other "farm services" rose 10.8%, while livestock, poultry and related other expenses were up 10.1%. Labor costs were 9.2% higher. The total farm expenditure per average farm in 2022 was $226,986, up 15.8% from $196,087 in 2021.

These long-lasting challenges have significant impacts on the economy and on human health. As estimated in the National Environmental Action Plans of countries in the region, the annual cost of environmental damages ranges from 2.1-7.4 per cent of GDP.

Pollution. Agriculture is the leading source of pollution in many countries. Pesticides, fertilizers and other toxic farm chemicals can poison fresh water, marine ecosystems, air and soil. They also can remain in the environment for generations.

The hidden environmental costs of food and agriculture add up to $2.9 trillion, the FAO estimates. More than half of this relates to nitrogen emissions – from fertilizer and manure used on land entering surface water and the air.

When natural habitats are destroyed or natural resources are depleted, the environment is degraded; direct environmental degradation, such as deforestation, which is readily visible; this can be caused by more indirect process, such as the build up of plastic pollution over time or the buildup of greenhouse gases that ...