Agriculture is the source of essential crops, including those that feed human populations, produce raw materials for manufacturing and provide feed for livestock. In each case, the scale of farming defines how it is carried out and whether there is a place for outside investors. In this regard, subsistence farming and cash crop production methods are very different, even when they produce the same crops.
Subsistence Farming Definition
Subsistence farming refers to the most basic form of agriculture in which farmers grow just enough to feed themselves and their families or meet their basic needs with crops that aren't for human consumption. While subsistence farming is relatively uncommon in the developed world, it is still an important source of food for millions of people in developing countries. People who practice subsistence farming may or may not have access to crops from other sources.
Cash Crop Definition
A cash crop is anything farmers grow to sell for a profit. A cash crop may be the excess of what a farmer produces and doesn't need to keep for subsistence. It can also be a crop specifically grown to sell. Commercial industrialized farming involves cash crops, as do smaller efforts that local farmers undertake to sell crops within their communities. Cash crops rely on careful planning and skillful management to produce a high yield that can be sold for a price that customers can afford and still pay for its own production, plus produce a profit.
Cash crops represent the potential for investment from outside agents. Cash crop producers need money up front to invest in seed, fertilizer, land leases, tractors and other heavy equipment, shipping, storage and labor. Large agricultural corporations rely on stockholders to provide the capital they need to grow and operate. Investing in commodities also relies on cash crop farming to produce agricultural goods that will sell for a price based on supply and demand in the market. Investors buy futures with the expectation that prices will rise, allowing them to profit from the difference between what they paid and what cash crops actually sell for.
In some cases, investment can alter the agricultural production cycle and shift it from subsistence farming to cash crop production. This is the case when an injection of capital from investors allows a rural farmer to expand a small operation. In other cases, demand for cash crops influences subsistence farmers to shift from crops that feed their families to those that they can sell for a profit. This can present a dangerous situation if market prices for the cash crops suddenly plummet or famine causes the price of food, which a farmer no longer produces, to rise above the level of affordability for a cash crop worker.