August 29, 2016

As trustee of Australia’s Sustainable Agriculture Fund (SAF), AgCAP announced a distribution of $10 million to the fund’s superannuation and institutional investors.

The fund controls a $150 million, 28,000 hectare portfolio of agricultural assets and is backed by investors including AustralianSuper, Australian Catholic Superannuation and Retirement Fund, and Auscoal Super. Earlier this month it announced full year pre-tax profit of $13.4 million and an increase in asset valuation of $2.9 million, placing it in a strong position moving forward.

“SAF’s returns have held up really well despite difficult seasons and market prices for some of our commodities,” said Martin Newnham, chief executive officer, AgCAP. “This has really vindicated our diversified portfolio approach and our farming philosophy, which is about taking the best of the family farming model and overlaying it with good governance and financial discipline.”

From this position, SAF is seeking to raise $220 million over the next year to fund the expansion of its farmland portfolio and to fund the exit of select existing investors.

Deo de Jesus, General Manager, Strategy with AgCAP states that there has been increased interest in SAF from institutional investors. “We have supportive foundation investors that would like to remain and indeed grow their investment in SAF,” said de Jesus. “However, there are other investors for their own internal reasons have asked us to test the market.”

Call to Supers

Earlier this year, at the annual outlook conference of the Australian Bureau of Agricultural and Resource Economics (ABARES) Australia’s Deputy Prime Minister, Barnaby Joyce called upon the country’s super funds to allocate more capital to agricultural investments.

Although the gross value of Australia’s agricultural production is expected to reach $60.3 billion in the next financial year and the value of agricultural exports are expected to top $45 billion, Australia’s super funds have committed only 0.3 percent of their total $2 trillion in capital in farm production.

There was movement toward increased investment, however, when Australia’s $53 billion First State Super fund made its first investment in Australian agriculture–acquiring almond orchards that span three states–- from listed agriculture company Select Harvests for $150 million.

“Supporting Australian industry–whether that be in agriculture or venture capital–is one of the enormous advantages that Australia has as a superannuation system,” says First State Super chief investment officer, Richard Brandweiner.

From Strength to Strength

Given the establishment of new free trade agreements and the low Australian dollar, AgCAP forsees a positive outlook for the agricultural sector and a resilience in rural land prices.

“We expect there to be further catch-up in land prices after the flat period at the start of this decade,” said de Jesus. “We anticipate the benefits of the free trade agreements entered into in the last couple of years will support land prices, particularly when the cycle turns in the wheat and dairy sectors.

“Once again, SAF’s diversification and approach to farming has proven a benefit for investors,” said AgCAP.

“We achieved very good yields on cotton crops at Darlington Point in NSW, good weight gains and strong market conditions on our King Island beef operation, and yearly productivity improvements at our Tasmanian dairy farms continue to stabilise [sic] performance and set up for above benchmark future returns to investors,” Mr. Newnham told AFR.

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Lynda Kiernan