Energy and resources (1 of 5)

Agriculture and food

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Farms grow crops and raise animals, and traders, processors and shops turn them into the food people buy.

The big idea: A farm turns inputs (seed, fertilizer, water, labour, machines) into crops it sells at prices it does not control, so its income is yield per hectare times price, minus input costs, and weather can swing all three. Along the chain, traders, processors and retailers add value and take most of what the consumer pays, so a farmer often receives only a small share of the final price.

One unit, in numbers: One hectare of wheat in India for one season: INR 90,475 comes in, and INR 47,475 (52%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 5 percent operating margin for listed farming companies, about 3 percent for food wholesalers and about 11 percent for food processorsRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: MediumA fair amount of money is tied up, in things like stores, stock or equipment. More on capital intensity
The number to watch: Yield per hectareHow much a hectare (10,000 square metres, about 2.5 acres) produces, for example tonnes of grain.

Ask this first in a case

Which crop or animal, where, and what is the unit: the hectare, the tonne or the country?

Words used above (2)

Hectare:: 10,000 square metres, about 2.5 acres.
Yield:: Output per hectare, such as tonnes of wheat per hectare.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Farmers sell crops and animals at market prices or at government support prices, so income is yield times price minus input costs.
Input companies sell seed, fertilizer, crop protection and machinery; seed and crop protection makers earn on their research, fertilizer makers on cheap energy.
Traders earn a small margin on very large volumes, plus money from storage, freight and timing sales across seasons and countries.
Processors earn the gap between the price of raw crops and the price of flour, oil, milk or packaged food.
Retailers and restaurants earn a margin on food sold; the less they waste, the more they keep.
Governments shape the whole chain through support prices, input subsidies, public procurement and trade rules.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One hectare of wheat in India for one season, sold at the 2026-27 minimum support price (rounded, illustrative costs). Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
3.5 tonnes at INR 25,850 per tonne (INR 2,585 per quintal)	INR 90,475	100%
Minus Seed	INR 4,000	4.4%
Minus Fertilizer	INR 7,000	7.7%
Minus Crop protection (pesticides)	INR 3,000	3.3%
Minus Irrigation and power	INR 5,000	5.5%
Minus Machinery hire	INR 6,000	6.6%
Minus Hired labour	INR 5,000	5.5%
Minus Value of the family's own labour (not paid in cash)	INR 13,000	14%
What is left (contribution)	INR 47,475	52%

Check: INR 90,475 minus INR 43,000 of costs leaves INR 47,475.

So what: Costs here come to about INR 1,230 per quintal, close to the government's estimate of INR 1,239, and what is left pays for the land and the farmer's risk. Most costs are fixed per hectare, so yield is the biggest lever: 10 percent more grain adds about INR 9,000 of revenue for little extra cost, while a harvest sold below the support price or a fertilizer price spike eats straight into income.

Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Yield per hectare
How much a hectare (10,000 square metres, about 2.5 acres) produces, for example tonnes of grain.
Typical: Cereals averaged about 4.2 tonnes per hectare worldwide in 2024: about 8.4 in the US, 6.5 in China, 5.2 in the EU, 3.6 in India and 1.7 in Africa[2]
Yield gap
The difference between the yield a farm gets and what good practice achieves in the same conditions; the biggest lever for farm income. Glossary: Yield gap
Input cost per hectare
Spending on seed, fertilizer, crop protection, water, power, machinery and labour for one hectare.
Typical: For Indian wheat, about INR 1,239 per quintal of output including family labour (2026-27 estimate)[3]
Farmgate price and support price
The price the farmer receives at the farm; a support price is a floor at which the government buys some crops.
Typical: India's wheat support price is INR 2,585 per quintal for 2026-27, up INR 160[3]
Post-harvest loss
The share of food lost between harvest and the shop, through spoilage, damage and pests. Glossary: Post-harvest loss
Typical: About 13 to 14 percent of food worldwide[6]
Food waste
Food wasted at shops, restaurants and homes, on top of the losses before sale.
Typical: About 19 percent of food available to consumers, about 1.05 billion tonnes in 2022[7]
Farmer's share of the food dollar
How much of what consumers spend on food goes back to farmers.
Typical: About 11.8 cents per dollar in the US in 2024: about 18.5 cents for food bought to eat at home and about 7 cents for meals eaten out, and higher for fresh fruit and vegetables than for processed foods[5]
Feed conversion ratio
Kilograms of feed needed per kilogram of meat, milk or eggs; lower is better because feed is usually the largest cost in livestock. Glossary: Feed conversion ratio
Self-sufficiency ratio
The share of a country's food it produces itself; Gulf countries import most of their staple foods.

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Which crop or animal, where, and what is the unit: the hectare, the tonne or the country?
What is the yield today, and how far is it from good practice in similar conditions?
What price does the farmer receive, and is there a support price or a buyer that pays it?
What are the input costs per hectare, and which is the largest?
How much is lost between harvest and sale, and is there storage, credit and market access?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Inputs: seeds, fertilizer, crop protection, feed, machinery, credit
Margin varies
Seed and crop protection makers (Bayer, Corteva, Syngenta, UPL), fertilizer makers (Nutrien, Yara, OCP, Ma'aden, IFFCO), machinery makers (Deere, Mahindra)
Seeds and crop protection earn on research and patents; fertilizer profits swing with natural gas and crop prices.
Step 2: Farming: crops, livestock, dairy, poultry, fish
Thin margin
Hundreds of millions of smallholders (most farms in India are under 2 hectares) and large commercial farms in the Americas, Europe and Australia
US-listed farming companies average an operating margin of about 5 percent, and weather can wipe out a year.
Step 3: Aggregation, storage and trading
Thin margin
Global traders (ADM, Bunge, Cargill, Louis Dreyfus, COFCO), cooperatives, local traders and government procurement agencies
Small margins on huge volumes, plus earnings from storage, logistics and timing.
Step 4: Processing: milling, crushing, dairy, meat, packaged food
Medium margin
Processors such as Wilmar, Olam, Almarai, Amul and many local mills
US-listed food processors average an operating margin of about 11 percent; raw materials are the largest cost.
Step 5: Distribution and the cold chain
Thin margin
Wholesalers, importers, cold storage and refrigerated transport companies
US-listed food wholesalers average an operating margin of under 3 percent.
Step 6: Retail and food service
Thin margin
Supermarkets, local shops, restaurants and caterers
Shops and restaurants keep most of each food dollar, but mostly to pay for their own staff, rent and waste.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Farming itself is spread across hundreds of millions of farms that take prices rather than set them, so it earns thin and volatile margins. The steadier profits sit in the concentrated links: seed and crop protection companies with patented products, low-cost fertilizer makers in good years, and branded food processors. Traders make money through scale and timing, and retailers keep most of the consumer's food dollar but spend most of it on their own costs.

Cost structure(5)

The main costs, each as a share of revenue (the money from sales).

Farming companies: seed, fertilizer, feed, labour and running the farms (cost of goods): About 87 percent of sales for US-listed farming companies[1]
Fertilizer on a US corn farm: About 17 to 26 percent of total production costs per acre, depending on the year (2006 to 2022)[4]
Indian wheat: paid-out costs plus family labour: About INR 1,239 per quintal, roughly 48 percent of the 2026-27 support price[3]
Food processors: raw materials and production (cost of goods): About 77 percent of sales for US-listed food processors[1]
Everything after the farm: processing, transport, packaging, retail and food service: About 88 percent of what US consumers spend on food; farmers receive about 12 cents of each dollar (2024)[5]

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Operating margin, US-listed farming companies: About 5 percent[1]
Operating margin, US-listed food processors: About 11 percent[1]
Operating margin, US-listed food wholesalers: About 3 percent[1]
Urea (nitrogen fertilizer) price: Above USD 850 per tonne in April 2026, up about 80 percent since February and the highest since April 2022[8]The spike was short: the WTO reports urea fell back to about USD 450 per tonne by June 2026, close to its level before the conflict. Check the latest price.
FAO Food Price Index: 133.3 points in August 2026, about 17 percent below its March 2022 peak[10]
World hunger: About 645 million people, 7.8 percent of the world's population, in 2025[11]

Typical cases(7)

Case prompts you might hear in this industry.

How can a state in India double smallholder farmer income?
How should a Gulf country secure its food supply?
Should an investor build a dairy farm in Saudi Arabia?
A food processor in Nigeria has low margins. Why?
Should a fertilizer company expand in Africa?
Does a cold store pay for itself for a fruit and vegetable cooperative?
Fertilizer prices just jumped 80 percent. What happens to farm income and next season's harvest?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Assuming yields can rise without extra inputs, water or know-how. Ask what the higher yield needs.
Forgetting post-harvest losses. Cutting losses can be worth as much as raising yields.
Treating the harvest-time price as the yearly average. Prices are usually lowest at harvest.
Recommending water-hungry crops in water-scarce countries such as the Gulf.
Treating food security as only a farming problem. It is also about trade routes, reserves and storage.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Fertilizer shock: after shipping through the Strait of Hormuz was severely restricted from 28 February 2026, urea rose above USD 850 per tonne in April 2026, up about 80 percent since February. The Middle East supplies nearly a quarter of global urea exports, so farmers in India, Africa and elsewhere faced higher input costs.[8]
Fertilizer trade itself was disrupted: the WTO reported in July 2026 that fertilizer shipments out of the Gulf through the strait came to a standstill, and that urea had fallen back to about USD 450 per tonne by June after its April peak. Price swings this fast raise the question of whether farmers cut fertilizer use and lose yield next season.[9]
Gulf food routes changed: some food flows to the Gulf were rerouted through Omani ports outside the strait, such as Salalah and Duqm, and overland via Saudi Arabia, with air freight for perishables at higher cost.[12]
Hunger is falling slowly: about 645 million people faced hunger in 2025, 7.8 percent of the world, the third year of progress, but about 309 million people in Africa remain undernourished.[11]
Food prices edged up: the FAO Food Price Index averaged 133.3 points in August 2026, 2.5 percent higher than a year earlier but about 17 percent below its March 2022 peak.[10]
India raised its wheat support price by INR 160 to INR 2,585 per quintal for 2026-27, which the government says is 109 percent above its estimated cost of production.[3]

Players by region(7)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: ADM, Bunge, Cargill, Louis Dreyfus (grain and oilseed trading)
Bayer, Corteva, Syngenta (seeds and crop protection)
Nutrien, Yara, Mosaic (fertilizer)
Deere, CNH, Kubota (machinery)
Europe: Yara (Norway, fertilizer)
Bayer (Germany, seeds and crop protection)
EU farms supported by the Common Agricultural Policy
Middle East: Almarai (Saudi Arabia, dairy and food)
Agthia (UAE)
SALIC (Saudi Agricultural and Livestock Investment Company)
Ma'aden (Saudi Arabia, phosphate fertilizer)
India: Amul (dairy cooperative)
IFFCO (fertilizer cooperative)
UPL (crop protection)
ITC (food and agribusiness)
Mahindra and Mahindra (tractors)
Southeast Asia: Olam and Wilmar (Singapore-based agribusiness)
Palm oil, rice and rubber producers across Indonesia, Malaysia, Thailand and Vietnam
China: COFCO (state-owned food and grain trader)
Syngenta Group (owned by a Chinese state company)
Africa: OCP (Morocco, phosphate fertilizer)
Farmer cooperatives and smallholders, who grow most of the food

Words to know(12)

Linked words have a fuller entry in the glossary.

Hectare: 10,000 square metres, about 2.5 acres.
Quintal: 100 kilograms, a unit used for crop prices in India.
Yield (glossary entry): Output per hectare, such as tonnes of wheat per hectare.
Yield gap (glossary entry): The difference between the yield a farm gets and what is possible in the same place.
Smallholder: A farmer with a very small farm, often under 2 hectares.
Farmgate price: The price the farmer receives at the farm.
Minimum support price (MSP) (glossary entry): A price at which India's government offers to buy certain crops.
Post-harvest loss (glossary entry): Food lost between harvest and sale.
Cold chain (glossary entry): Keeping perishable food cold from farm to shop.
Feed conversion ratio (glossary entry): Kilograms of feed per kilogram of meat, milk or eggs.
Urea: The most common nitrogen fertilizer, made from natural gas.
Food security: Reliable access to enough safe, nutritious food.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Commodity

Sources(13)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.