August 17, 2020

By Lynda Kiernan, Global AgInvesting Media

Rural Funds Management (RFM), manager for the ASX-listed Rural Funds Group (RFF), an owner of a diversified portfolio of high-quality Australian agricultural assets valued at approximately A$900 million (US$648.5 million), announced it has agreed to acquire 5,409 hectares (13, 366 acres) of sugar cane farms in Queensland from MSF Sugar Pty Ltd. for A$81.1 million (US$58.44 million). 

The deal included the associated plant and equipment, along with 8,060 megaliters of water entitlements, with the opportunity to acquire additional water rights in the future. 

RFM stated that it intends to undertake a conversion on the land, shifting production to approximately 2,200 hectares (5,436 acres) of macadamia orchards, with a significant portion of the balance of the land being used for cropping.

Once completed, this action will significantly expand RFM’s modest existing macadamia holdings currently totaling 259 hectares across five sites – two of which are under development.

Approximately one quarter of the MSF land is being leased by farmers. To these operators, RFM is offering a continued lease deal including a two-year off-take agreement for the cane produced on the land. If a farmer halts cane production, there will be a reduction in the purchase price.

Coming Out on Top

This deal by RFM is good to see after a challenging and distracting period for the asset manager. In February of this year, the Supreme Court of New South Wales found in favor of the publicly-traded agricultural investor against U.S.-based activist short seller Bonitas Research, finding that claims made by Bonitas against Rural Funds were misleading and false. 

The decision handed down by Judge David Hammerschlag against Bonitas was damning and clear. Finding that Mr. Weichert and Bonitas violated sections 1041E, 1041F and 1041H of the Corporations Act, as well as section 12DA(1) of the ASIC Act, Judge Hammerschlag stated:

“Commencing at 9:23am on 6 August 2019, Bonitas and Wiechert engaged upon a concerted course of making statements and disseminating information scathingly critical of RFM and RFF.”

“They accused RFM and RFF of dishonesty and of being a fraud. Their plain intention was to drive down the price of units for commercial gain.

“Statements which they made and information which they disseminated were false in material particulars and materially misleading. I am satisfied that they knew or ought reasonably to have known that the statements and information were false in material particulars or were materially misleading. They did not care that they were false.”

Now, RFM is back to the business of agriculture and is planning an expansion into a crop with promising potential. Although macadamia nuts represent a small portion of Australia’s agricultural production, macadamias are the only crop native to Australia that is produced at scale and traded on international markets – making the country a leading global producer, exporting 70 percent of its yearly crop. 

The Australian Nut Industry Council predicts that by this year approximately 24,000 hectares (59,305 acres) of macadamia orchards will be planted across the country, with production expectations of 19.500 tons valued at more than A$300 million (US$216.3 million).

The lion’s share of demand is being generated from Asia, where urban consumers in particular are more focused on healthier eating and the benefits that nuts can provide as a healthy snack in a cleaner diet. 

However, Research and Markets also noted that there is growing demand being seen for organic macadamias in European markets, stating that the global macadamia market is projected to grow at a CAGR of 6.6 percent between 2019-2024. 

• Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.