News emerged in March that the Sustainable Agriculture Fund (SAF) – a portfolio of assets totalling 17 farms across 27,000 hectares – was to be put up for sale. The fund was created in 2009 by a group of superannuation funds and had reached the end of a 7.5-year fixed term.
The decision was a talking point; the fund had been performing well – it had returned 12.7 percent gross during 2016 and 10.6 percent net of fees – and as of August last year had been plotting to raise a further A$220 million ($163 million; €147 million) in capital to expand the portfolio. The decision to sell was therefore unexpected.
Tim Burrow, head of trade association Agribusiness Australia, says the decision to sell the 27,000 hectares of farmland is a display of confidence in the sector.
Given the calls for increased investment in Australia’s agricultural sector, what is your interpretation of AgCap’s decision to sell the Sustainable Agriculture Fund?
This is a case, in my opinion, where early “adopters/investors” are now reaping the rewards of their investment. It’s a good example of just how good agribusiness investments can be. Investing in ag is long-term but it’s not necessarily a life sentence. There’s absolutely no doubt that the sector needs significant and mammoth amounts of investment.
Our competitors are really other countries and they’re investing in infrastructure. In our opinion, it’s not just investing in the farming aspect of the sector that’s needed, but investment in everything from research to logistics to trade to education in order to make the whole agribusiness sector work well.
Do you think Australian investors are realising this?
Yes, there is a significant change in the wind over the last one to three years, where investors are taking a lot more interest in the agribusiness sector. One example is First State Super, which in 2015 invested A$150 million in almond producer Select Harvests. We too have been disappointed over the past decades that Australian funds in general have not been more active in the agribusiness sector, but I also think that the farming community has done itself some disservice by being perhaps a little too negative about it and saying how difficult it is to be agriculturally-orientated, when in reality it is like many businesses that have a set of uncontrollable factors.
But one would think that with challenges such as food scarcity/food security the agricultural sector would be increasingly important.
It will be. Remembering that Australia currently only produces about 1 percent of the world’s food, and to keep pace with the growing population, which if the pundits are right and we’re going to end up with nearly 10 billion people on the planet, Australia will need to double its food production just to maintain that 1 percent status.
But we won’t have more land, more water or more sunshine, so we will need to do it significantly more efficiently. In fact, over the last two decades, we’ve actually reduced the amount of arable land we’re using by over 10 percent, while increasing production volumes by about 40 percent over that same time.
The opportunity to increase our productivity is huge but we need investment. It doesn’t matter to us where it comes from, but the reality is that a significant amount will come from overseas, at least in the short term.