Investment
Aussie agriculture reaches new highs

Agriculture Census data from the Australian Bureau of Statistics highlights opportunities for institutional investors as the total value of Australia's agriculture production continues to rise.

During 2015-16, the gross value of Australian agriculture increased by 6% to $56 billion with all states except Northern Territory showing an increase.

Industry Super Australia has been one group supporting the idea of further agriculture investment. ISA chief economist Stephen Anthony recently said that with the right expertise and policy settings, industry superannuation funds could be enticed to substantially increase agriculture investment.

"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," he 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."

In a discussion paper published last month, ISA responded to calls from government and the agricultural sector to increase their $1.6 billion stake in local agriculture and support regional development.

The Census data shows Queensland was the highest contributor to Australia's agricultural sector at 12%, driven by an increase in livestock disposals (up 14%) and total value of crops (up 11%).

ABS director of environment and agriculture statistics Lauren Binns said the growth had again been driven by increases in the value of livestock products.

"The value of Australia's livestock disposals continues to increase, up 10% to $20.6 billion compared to 2014-15," Binns said.

"Beef was again the largest contributor to this rise, despite fewer animals heading to the saleyards, with strong price rises both domestically and internationally."

The most valuable crop types are wheat ($6.2 billion), fruit, nuts and grapes ($5.6 billion) and vegetables ($3.6 billion).

Among several recommendations, ISA has suggested 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 said global investors are also rapidly accumulating strategic stakes in local agricultural holdings, with Canadian and US pension funds investing more than $1 billion in Australia since 2007. One agricultural sector that has garnered interest in Australia more recently is water.

The ABS said differences in regional climatic conditions appear to be influencing the use of water on Australian farms.

Binns said farmers were modifying their practices to adjust to water availability and climatic conditions, including selling off allocations to recoup costs rather than cropping in a bad year, watering larger areas less, or changing crops planted.

"The above average temperatures and dry conditions in southern Australia through 2015-16, along with record high prices for water, were critical factors in water use for Victoria and South Australia in particular," she said.

"The Agricultural Census data showed that while the total volume of water used in 2015-16 decreased by 3% to 9,157,291 megalitres, the total area watered across Australia increased by 4% to 2,147,915 hectares."

Read more: AgricultureWaterISAABSAgriculture CensusAustralian Bureau of StatisticsInvestmentIndustry Super AustraliaLauren BinnsSuperannuation
Link to something DFUKVIdp