Generational change represents a buying opportunity
There is an evolving structural shift in the ownership and management of agricultural land in Australia, largely driven by the need to achieve economies of scale and improve production efficiencies through the spreading of fixed costs and the use of advanced, productivity-enhancing farming technology.
At the same time, a generational change in the agricultural sector is adding momentum to this trend as professional, large-scale operations aggregate multiple properties, and take over from small scale retiring farmers on family-owned and operated farms.
Predictable and manageable returns
Whilst returns from the agricultural industry are cyclical, the industry enjoys a different (uncorrelated) cyclical pattern to other industries and other major asset classes. Therefore, investment into the agriculture industry can provide significant additional diversification benefit to an existing diversified investment portfolio that does not include agriculture. In the long run, agricultural returns are consistent with returns from other major asset classes. Like other asset classes, though, it is the performance of the manager that has the highest impact on achieving superior returns.
Significant out-performance in agriculture compared with long run averages can be achieved through scale, effective risk management, intuitive strategic planning and timely execution of operational and strategic decisions. Attractive profits are achievable over time if the focus remains always on selecting assets well, improving productivity and lowering the per unit cost of production. These principles are at the core of the Management Team’s business philosophy and experience.
Scope to upgrade productivity
Land value appreciation is a major component of total farm returns and can be maximised by selecting land well, developing that land over time, aggregating land with neighbouring or nearby properties, improving the infrastructure on the land and implementing superior risk mitigation strategies enhanced by the greater optionality enabled through scale and a diverse yet complementary asset base.
It makes most sense in Australia
Australia’s competitive advantage in the global agricultural industry is remarkable, based on:
-- a stable and transparent regulatory regime for the ownership of land and water assets;
-- recognised leaders in agribusiness, and early adopters of agricultural sciences and agricultural technologies
-- vast areas of undeveloped or under-developed land remain available for purchase
-- production cost advantages are available through scale, technology and agricultural management expertise
-- reliable land and water tenure and transfer systems
-- typically export over 65% of total annual production
-- efficient regional and port-side infrastructure and transportation systems
-- “clean and green”reputation with best practice regulations on workplace safety, food security, disease
-- control, quarantine, animal welfare, environmental management and traceability.