Robbins says that certain macroeconomic drivers also supported Telstra Super’s investment in the trust. Milk is one of the cheapest forms of protein, and more of it is expected to be consumed by people in developing nations as they move away from carbohydrate-based diets. The Warakirri properties, run by separate farm operators and located in south-east Gippsland, NSW and Tasmania, sell to big milk product manufacturers such as Dairy Farmers, Fonterra and National Foods. More than half of the produce is exported, and approximately 60 per cent of this is shipped to Asia, sometimes as products such as cheese and milk powder, Beaton says.

According to Robbins, Telstra Super’s mandate to the trust “had a lot to do with market timing” as the fund anticipated a steady rise in the price of milk. But both of the funds and Warrakirri’s Beaton agree that it is too early to derive meaningful performance data from the trust. The investments have incurred start-up costs, Robbins says, such as hiring farm managers and backing their operations. Also, “you need to get the herd condition up”. Furthermore, there is a sour side to the escalation in the milk price: upswings in the costs of fertiliser and of importing grains for stock feed have eroded these gains. The diversification rationale for investing in the trust is strengthened by the range of farms that Warakirri owns within an agricultural sub-sector. In its report, Frontier writes that an effective agri investment vehicle would be a fund-of-funds comprised of agricultural sub-sector specialists. But there are few, if any, of these managers available in Australia.

Given the immaturity of the sector and limited research into it from asset consultants, neither Telstra nor Vision Super is actively looking for further agriculture investments, Robbins and Smith say. While Telstra Super spent a year on due diligence of the Warakirri trust itself, Vision Super sourced research from Freshlogic, a consulting firm working in the food and agribusiness sectors, as it had already conducted an assessment of the fund.

Going direct, going long

While the potential upside is attractive, investing directly in agricultural land requires buyers to take on operational risk, high due diligence costs, and deploy farming expertise – something not so easily done from city skyscrapers. The $6.3 billion VicSuper has chosen this direct route, buying up properties in regional Victoria for its ‘Future Farming Landscapes’ theme. The fund aims to invest up to $240 million in the sustainable agriculture and environmental management program in the next 10 to 15 years.

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