Lucy Dean, Australian Financial Review, 19 September
The combination of rising food insecurity means investing in farmland should be one of the “most exciting” theses for Australian investors, however the sector remains dominated by offshore investors.
The COVID-19 crisis highlighted the dangers of food and water insecurity as local supermarket chains struggled to stock shelves, and this offered a real opportunity for Australian investors to drive productivity in the farming sector, Proterra Investment Partners managing director Becs Willson told The Australian Financial Review Property Summit on Monday.
“There’s just no question that the underlying thesis for investing in land is that we are running out of food, and that we must drive productivity at the farmgate level and that should be very exciting for investors,” said Ms Wilson.
However, she has seen most strong investment flowing from offshore and largely from the US, Canada and the UK, but domestically, institutional investors have been “nervous” about putting money in.
Foreign investors have been responsible for developing large swathes of Australian farmland from low-grade productivity to high-grade by improving water management and allowing more high-value crops to be grown, she said.
However, she believes Australian investors are still questioning when farm land will present itself as a “proper asset class”, while mixed returns have also presented challenges.
The classification of farmland as an “alternative” asset presents challenges in bringing investors onboard the managing director of agriculture-focused AAM Investment Group Garry Edwards told the Summit.
“[But] there is literally nothing alternative about food production, this should be the number one mainstream thing that people understand and invest in,” he said.
“The fact that it’s put into the alternate market often means that the asset consultants, advisers and people don’t really understand how to articulate the risk.”
An ageing farmer population means there are properties available to purchase with the potential of developing the land, added Tim Samway, chairman of pastoral land manager Packhorse Pastoral.
“We come across a lot of old farmers who have nothing to do other than sell their property at the end of their lives, and that’s how they make their money, but the reality is, they have underspent on it over the last 20 years because they haven’t had the capital,” he said.
“So it’s an outstanding opportunity to find, effectively businesses but represented by land that have been under-invested for 20 years and substantially change the yield from them.”
Mr Edwards said agriculture shouldn’t be valued like residential real estate and should be considered an entirely different asset class.
“Focusing on that succession planning issue, there’s literally hundreds of thousands of dollars of investment potential. Australia is an inhabited country, it’s far from a developed country. So much of the capital growth that is occurring out there is about a step change in productivity improvement.”