“There’s been plenty of buying of farmland in other parts of the world,” he says.
Increasing demand for food globally is the key driver behind the interest, he says, with climate change playing a partial role in this.
The Sustainable Agriculture Fund aims to invest institutional and wholesale money into the ownership and operation of Australian farms. Investment returns come from two factors: the change in value of the farm properties and profits from conducting farming activities. The fund manages $145 million of investments.
Apted and Delahunty say domestic investors are not interested in farmland because other sectors are easier to understand and therefore invest in, and agriculture has a mixed performance history.
“There is a lack of good quality, publicly available data on the profitability of farms,” Apted says.
Christian Super, which manages more than $450 million in superannuation assets, has a 2 per cent allocation to Australian farmland. This is entirely invested in the Sustainable Agriculture Fund.
Tim Macready, Christian Super’s CIO, says investing in farmland can mean there are some duplications of risk. Performance drivers are likely to be heavily correlated to existing risk exposures, particularly commodity prices and currency exchange rates. It is for these reasons that Macready believes Australian investors are not flocking to invest in farmland.
“I think there’s a decent amount of foreign interest in Australian investments more generally, so I wouldn’t necessarily see this as an indicator of particularly exceptional opportunities within Australian farmland over other types of assets,” he says.
“Overseas investors don’t necessarily have the high commodity exposure or Australian dollar exposure that domestic investors experience, so they are perhaps looking for those particular risk diversifiers.”
Macready says that more agriculture funds managers now aim to raise capital, indicating there is more investor appetite.
“It’s often hard to tell which comes first: the super funds or the funds managers deciding that there is potentially money to be made here,” he says.
For Christian Super, agriculture has the potential to meet the fund’s socially responsible investment criteria.
“The sustainability objectives are very closely aligned in agriculture to the financial objectives if you are trying to run the farm long-term.”
VicSuper’s Lunt says “holding a ‘real’ asset is one of the major benefits of investing in agriculture as it offers inflation protection”. Other benefits are contributing to food security and participating in Australian food production as it positions itself to provide food to the growing economies of Asia.
