What attracted you to Packhorse?
I’ve known Packhorse founder, Tom Strachan for 20 years and throughout this time we’ve discussed regenerative agriculture and the opportunity to sequester carbon at length. We didn’t know a huge amount about it, but what we did know is the positive contribution and real change it can make to the environment and to the climate.
I’m also extremely focused on global food security and healthy dietary options, the benefits of eating food that’s been grown naturally, in particular, quality protein such as beef that’s grass fed.
On top of this, my background is investing. I have always believed that the best investments are the ones that are truly sustainable. Anything outside of this is speculating, but long-term sustainable investments that compound growth over extensive periods of time are the best choices.
So why Packhorse? It has enabled me to create a sustainable investment company focusing on regenerating the land, positively impacting the environment and addressing global food supply.
The other major factor that makes Packhorse so interesting is our ability to capture carbon on the millions of hectares we are acquiring.
It’s a continuous theme in my life, to build on what I’ve been doing and focus on new areas where I can make a difference. Packhorse taps my strengths and applies them to emerging areas such as carbon transition risk scoring and changing the way people think about climate risk on balance sheets.
Can you explain the role carbon sequestration will play in the business?
Packhorse is a cattle agistment business, with a difference. Our prime focus is the land – the quality of the grass, the soil and overall health of the pastures – which is the key to deploying our long-term vision for Packhorse to be the largest land holder and carbon capture business in the country.
There’s evidence of many carbon projects that don’t make financial sense, they appear to ‘do good’ but people have lost a lot of money along the way. Many players with property have spent a fortune to implement carbon capture projects, but once this is done, it stops there with no other thought around using the property to generate other income streams.
At Packhorse we’ve developed a profitable business model that makes complete financial sense. As we are preparing the land and soils to capture maximum amounts of carbon to generate credits, this approach also increases our cattle agistment revenue stream along with capital appreciation of the land.
While farmers will be looking at capturing carbon on their 4000-hectare property, and don’t get me wrong, we are very supportive of them doing that, we’re doing this across a million hectares, and generating other income streams from the rejuvenated land at the same time. And we’re already on our way with 66,000 hectares under management.
How many years will it take to generate carbon credits?
The carbon credits are estimated to come in year five after the acquisition of each parcel of land. We’re in the phase of building to this by baselining the organic soil carbon of our properties and implementing land regeneration practices that will increase the amount of carbon dioxide able to be captured.
For many landowners, the cost to sequester carbon makes it unattainable but it works for Packhorse as we are doing this on a massive scale which brings down the sequestering costs per hectare.
We have just completed the carbon baselining of our newest property, Stuart’s Creek which has identified approximately 2,800 tonnes of carbon across an estimated 4,000 hectares of land that can be sequestered per annum. We will now implement ongoing measurement.
Will the carbon credit units be sold internationally?
We’ve decided to operate the business as if the only opportunity is to produce Australian Carbon Credit Units, which require the strictest measurement protocols. This means Packhorse’s sequestration project is of the highest quality so when we do seek to maximise opportunities to sell Carbon Credit Units on the private market, we anticipate they will be considered extremely high- class carbon credit units, because of the work we’ve implemented.
When we prepared the Information Memorandum for Packhorse’s first raise in May 2021, the price of an Australian Carbon Credit Unit in Australia was $16.50, now four months later it is $23. In fact, the carbon credit market grew 20% in 2020 to $272bn so the potential upside for Packhorse investors is significant.
What is the role of cattle in the process of sequestering carbon?
The cattle are essential. The secret to a great lawn is to mow it regularly, not too deep, then allow time for it to recover. And that’s essentially what we are doing with the cattle, but cows are much better than a lawn mower because they have an in-built fertilising system. They eat the grass, then urinate and defecate on the land.
And because we’re out in the country, dung beetles take the cow manure and bury it in the soil and create a much richer opportunity for grasses to grow.
By rotating the cattle, it ensures our properties have grass cover all year round, keeping roots in the soil, keeping the soil together and making it resilient against both extremes of minimal and heavy rainfall.
This process traps more carbon in the soil because there is more grass above the ground capturing sunlight which generates growth, deeper roots and therefore more carbon in the soil below ground.
What makes Packhorse a wise investment?
Agricultural land is an outstanding asset class that a lot of people haven’t thought about because of its historical links to droughts and impacted farmers. This has created some uncertainty in the investment community. But what people don’t realise is that many farmers have been capital constrained with limited funds in the bank to actually drought-proof their properties and prepare for minimal rainfall.
There are also examples of large companies managing rural properties on a mass-scale that haven’t done well because they have attempted to be the whole value chain – own properties, breed and own cattle right through to owning the abattoirs and distribution chains. Some parts of this value chain are very challenged, and unfortunately it has led to an overall view that these businesses are inherently unprofitable.
Packhorse is focusing on the most profitable part of the value chain – property ownership. And we are removing volatility for investors by creating a regular income stream, agisting cattle on the land.
The crucial point to remember is that no additional agricultural land is being made. And each year, more of this land is becoming ‘desertified’ because of the impact of farming practices. And as the world’s population continues to grow, we are seeing increased demand for sustainably sourced Australian grass-fed beef. We know that food production will need to almost double in the next 30 years to feed the population and Packhorse intends to play a significant role in contributing to this supply.
How does Packhorse stack up against competitors?
There are very few competitors who are thinking like us. Many other businesses are running completely diversified properties managing sheep, cattle, orchards, macadamia nuts and water rights. While diversification spreads risk, it also creates ‘diworsefication’ as less and less focus is applied to each aspect of the business.
On the contrary, our focus is on the land and the soil, deploying nature-based carbon sequestration and doing cattle extremely well. It’s a pure ecosystem. The upside for investors is not only the potential for capital appreciation, but also a regular income from our agistment model and further potential upside from thecarbon sequestering program, and on top of this our investors are helping to address climate change.
What is your ultimate vision for Packhorse?
To have millions of hectares of land under management and change the way cattle are produced in Australia.
There are many older generation cattle farmers approaching retirement who have lived and breathed the land producing cattle, but it’s not efficient. In some cases, we are seeing family successions come to an end, as the younger generation chooses to relinquish the land and create a life outside the country.
This means many large cattle properties are coming up for sale and we see an opportunity to aggregate them and create a better scale operation that is focused on producing a high-quality product.
It’s a great story and a logical future for this industry, providing a good outcome for every player. We are effecting real change to Australia’s carbon footprint which is certainly a positive contribution to the planet’s climate.
And we are leading the way for others. We can’t do all of this ourselves and I’d welcome 10 other competitors in this space so we can address Australia’s endpoint emissions and have 50 million hectares actively sequestering carbon using a sustainable, nature-driven process.
It’s truly exciting.
IMPORTANT: The information on this webpage is general information only and does not take into account the objectives, financial situation or needs of any particular person. An investment in Packhorse Pastoral Company (Australia) Limited (Packhorse) is subject to risk and is restricted to sophisticated investors. Applications to invest in Packhorse must be made on an application form attached to or accompanying the information memorandum for the offer. Investment decisions should not be made upon the basis of past performance achieved by Packhorse. Past performance is not a reliable indicator of future performance. No person, company or entity makes any promise or representation or gives any guarantee as to the performance or success of Packhorse, the repayment of capital or any particular rate of income or capital return. To the extent permitted by law, Packhorse and its associates, and any of their directors, officers, employees, representatives and advisers are released from any liability (including, without limitation, in respect of direct, indirect or consequential loss or damage arising by negligence or default) in relation to any anything contained in, or omitted from, this webpage.