In 2006, the fund began buying tracks of farmland in the corridor between Swan Hill and Kerang. The management of these properties has been outsourced to Kilter Pty Ltd, an investment manager based in Bendigo. Interestingly, the fund offered management or consulting roles within the program to the previous owners of the properties, from which they could draw an income. Bob Welsh, the chief executive of VicSuper, says the program is a long-term property investment aiming to manage land, water and environmental assets for traditional and new income streams, such as agriculture, forestry, alternative energy, water and environmental management projects called ‘ecosystem services’.
The fund aims to implement sustainable primary production practices on the ‘landscapes’, or collected properties, that it manages. In the initial stages, the existing farming operations will be maintained before new agricultural and environmental restoration practices are phased in. If all goes to plan, the properties will eventually be redesigned so that sustainable agricultural production and environmental protection practices are functioning. Frontier observes that conservation of land, water and native plant species, in conjunction with advances in farming efficiency and technology, will be required to mitigate future environmental challenges, such as climate change.
“We’re about sustainable agriculture. Our interest is to protect productive agricultural land,” VicSuper’s Welsh says.
Safety in numbers
In its report, Frontier describes the global trends expected to determine the forces driving prices of agricultural goods and services in the future. The global population is expected to grow to 8 billion, or roughly 50 per cent, by 2025, causing greater demand for soft commodities, livestock and water. “While current world food prices are at historical highs, the supply-demand equation appears to indicate that the pricing pressures are likely to continue,” the consultancy writes. Compounding this pressure on suppliers, urbanisation will occupy more arable land around cities.
Driven by the competing pressures of urban expansion and agricultural enterprise, the rate of reduction in arable land is between 30 and 35 times the historical rate. Water supplies will become more valuable, since agriculture accounts for 70 per cent of freshwater used in the world.
The use of farmlands to grow matter for biofuels will also make food more expensive. The Organisation of Petroleum Exporting Countries (OPEC) expects a four-fold increase in non-OPEC biofuel production by 2030, based on what these countries produced in 2005.
The possible vehicles through which institutions can access this story include:
• Specialist agriculture managers who invest directly into a sub-sector (such as Warakirri);
