But there are drawbacks, too: volatile cashflows, particularly if growing annual crops; commodity price risk; climate and weather risk; and lack of historical risk-return performance of institutional investment in agriculture.

However there are some benefits to a high rate of foreign investment in Australian farmland outside the world of funds management: rapid industrialisation and specialisation of farming and production; investment in horticulture and more efficient water use; and greater exports of soft commodities.

But there are also negatives. Lunt and Macready warn that if investors are investing in farmland for reasons not linked to the underlying fundamentals, Australian farmland prices could become inflated.

 

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