What First State Super’s Investment in Australian Almonds Means for the Farmland Investment Market

I think it’s safe to say that Australia’s farmland investment industry is really starting to boom. From a lot of promise 18 months ago, the country’s farmland market was given a huge vote of confidence last week by one of its own pension funds — First State Super.

Australia’s superannuation industry has been highly criticized in the past for not supporting the country’s agriculture sector, despite having nearly A$1.9 trillion ($1.5 trillion) of financial assets to its name. Scandalous managed investment schemes in the 1990s/early 2000s, concerns about liquidity and a poor selection of agriculture investment products to choose from, have all been blamed for the pensions’ absence from the sector. Some have even said Australia’s super funds do not share the concerns of other nations around food security, global population growth and diminishing natural resources — agriculture’s main investment thesis — because Australia exports around 60 percent of all agricultural produce and is a country rich in natural resources, particularly land!

Now, some super funds did enter the market a few years ago: the Sustainable Agriculture Fund (SAF) raised A$145 million ($100 million) predominantly from super funds eight years ago; Warrakirri Asset Management set up cropping and dairy trusts specifically for super funds 10 and five years ago respectively; and VicSuper has been actively invested in water assets for many years. But this is hardly a critical mass and was followed by a good five to six years of inactivity and negativity around the sector from Australia’s pension industry.

So last week’s A$150 million almond farmland acquisition by First State Super was a coup for the industry, and has created great excitement in the industry.

The emergence of an increasing number of players to service the farmland investment market is a key feature of the growing market. Select Harvests, the listed agriculture company that sold three almond properties totaling 3,850 hectares (9,514 acres) to First State Super, was advised by PPB Advisory, a firm more commonly associated with corporate restructuring and advisory. Noticing the increasing demand for Australia agriculture investment, PPB has carved itself a niche in the growing sector and is currently advising on A$400 million worth of deals, according to Tim Lee, director at PPB.

PPB is not the only advisory firm turning its attention to the investment market; accountancy firms Deloitte and BDO are both building teams and expertise to play a role in this market, hoping to help matchmake investors and assets, and structure deals. And even some law firms have been playing a much broader role in the farmland investment market than they might for other asset classes.

While large, global investment consultancy firms such as Towers Watson, Townsend and Cambridge Associates are now dedicating increasing resources to this sector, it can be argued that it’s taken some time for them to develop this side of their business, encouraging the emergence of independent consultants with specific agricultural expertise. And with the exception of a few big names such as Macquarie and UBS, there are very few global investment banks offering agriculture investment opportunities in Australia, leaving the door wide open for new investment managers to establish themselves.

Real estate agencies are also stepping in to take a slice of the pie with some, such as Colliers International, expanding their agribusiness teams to respond to increasing enquiries from investors for farmland assets.

While it may have taken some time for the local pension industry to get acquainted with the players out there, some European and North American pension funds have been investing in Australian farmland for many years. They’ve done this either through what are now some of the more established investment managers for Australian agriculture — such as Macquarie’s Pastoral Fund, Blue Sky Funds (which advised First State), Australian Pastoral Fund, and AAG Investment Management — or more directly. So the market has been successfully evolving for many years without the local pension industry’s involvement.

But what First State’s investment does do is give a rubber stamp of approval to other super funds that domestic agriculture investment is back on the menu. The recent profit report from SAF, one of the only farmland funds that did attract super fund investment, should also help the cause. As will the continued land investments by local mining tycoons Gina Reinhart and Andrew “Twiggy” Forrest, who surely know a thing or two about making returns.

So, to the consultants and managers that have been circling Australia’s farmland market for many years now: this could be the moment you’ve been waiting for. Enjoy!

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— See AgFunder.com for agriculture investment opportunities —