Why is the Agricultural and Agribusiness Sector So Lucrative on Paper yet so Prone to Shocks and Failures?

By Saliu Bello

Why is the Agricultural and Agribusiness Sector So Lucrative on Paper yet so Prone to Shocks and Failures?
The saying that "a good numbers of start up companies close down before they are even started" applies to agricultural business. But why is this so? Different opinions have been documented in the literatures about the reasons for their closure. Inexperience, pausity of funds, mismanagement, change in government policies and a host of other reasons. 

Despite the lucrative nature of agriculture in all the various agricultural enterprises, why are they failing? I have seen large farms ( mechanised crop production outfits and Poultry farms) close down or still existing but struggling in the midst of abundance. 

But why?

Here are some of the reasons:

1.  IT STARTS FROM THE BEGINNING: The decision to invest in the agricultural or agribusiness sector is DEVOID OF ANY WELL LAID OUT PLAN AND VISION. 
The concept just pops up from no where! 

E.g Reading articles on

" Making millions from Cucumber farming" or

" tomatoe, a money spinner" or

" Make Millions doing dry season farming" or

"Make millions from Exportation with ease"

" Making it big from Plantain"

" Success story of youngster who made his first million at 18 exporting agro produce


To others, they have just seen a neighbour acquire wealth within a short time growing water melon or Cassava! <<< SMILES!..cassa.. what? >>>

Alot of us fall into some of those categories. 

To others, a 5 minutes simple mental mathematics was all they did that spur them into the business. 

This initial none-preparedness is USUALLY A RECIPE FOR FAILURE!

SOLUTION: Plan, plan and plan. Integrate your processes appropriately. Have stratergic plans to achieve your business aims. Take precautions. Heed to advises. But watch where you seek your advise. Think your thoughts through from A-Z.

E.g. A seed farmer can sell excess seeds as grains.
Feed your farm waste to your livestock (cattle, goat)
Generate power from bio waste to power farm house or workers shed. 

2.  PRINCIPAL CAUSAL OF FAILURE: I have heard or read countlessly of how a lot of people stumbled on the agribusiness they are into without training, learning, test trial on small scale or even understudying of any sort. I stumbled on Raising Layers birds after a good success with Quail Birds and Broiler grow out. I failed woefully. Some GOOD money is lost, precious time wasted.

The failures in the agricultural and agribusiness sector has more to do with INABILITY TO CLOSE THE KNOWLEDGE GAP AS AGAINST other known reason for business failure. We know next to nothing on the aspect of farming or agribusiness we are going into!

Ranging from the plant agronomy to farm management, farm planning, farm layouting, storage of produce, pest and diseases; including marketing and logistics, processing and packaging.

SOLUTION: Go for short courses like training, workshops, field days, open days if available, go on agro tourism to viable and enterprising firms before starting out. 

3. Long gestation period: Unfortunately, Large number of us do not usually know that our prefered area of interest in agriculture or agribusiness USUALLY HAVE GESTATION PERIODS. E.G Im planning exportation of cocoa, cashew, kola or palm fruits. It will take 3-4 years before they mature to start giving me some returns. 


Of course, short duration crops like vegetables and other annual crops can be be developed in the interim to sustain cashflow while we await the long gestation investments.

4. LONGER PAY BACK PERIOD : Profit taking and the payback period is usually long, The profit trickles in slowly with ease. Not for faint hearthed. Before your investment start bringing in money, think of other money generating ventures e.g for some vegetables (6 weeks -3months)

SOLUTION: Plan for CASH FLOW. ALWAYS HAVE A PRODUCT TO SELL AT YEAR ROUND. Invest in Irrigation accessories if need be!