Australian superannuation funds could take the country's agriculture sector to the next level in global competitiveness but they will need help in doing so.
Industry Super Australia has published a discussion paper that responds to calls for the $2 trillion super sector to invest in local agriculture and support regional development.
Among several recommendations, the lobby group suggests establishing a regional development bank that would provide advisory services to rural producers and arrange long-term finance with an aim to efficiently intensify operations.
It would like to see domestic operators forming consortia with local and foreign processors and distribution networks to reduce agricultural sales risk. It also recommends Treasury take a more strategic approach to foreign investment rules; and that an ACCC regulatory arrangement be established, leading to effective price discovery and transparency in wholesale agricultural markets and neutralise big supermarket and international subsidy impacts.
ISA chief economist Stephen Anthony said with the right expertise and policy settings, industry superannuation funds could be enticed to substantially increase their $1.6 billion stake in Australian agriculture.
"Institutional players have not always fared well in Australian agriculture. Past failures, poorly executed or short sighted, usually revealed on closer examination mitigating factors, if not a silver lining," Anthony said.
"With scale and the right settings, the fundamentals of relatively stable returns, capital appreciation from rising land values and renewable income cash flows are very attractive.
"Into the future, the potential Australia has to position itself as the food bowl for Asia's burgeoning middle class is really quite staggering."
He said to achieve this super funds will need reliable, independent data; agriculture-specific expertise; and revised national policy settings.
Global investors are rapidly accumulating strategic stakes in local agricultural holdings, with Canadian and US pension funds investing more than $1 billion in Australia since 2007.
"That global investors with big reputations think they can make a go of farming in Australia, and are prepared to invest significant amounts for the long haul, is encouraging," Anthony said.
"Australia is receiving ready-access to foreign capital and expertise; but our agricultural industry is being 'cherry picked' with quality assets falling into the hands of external investors."