What’s in your investment pipeline for 2017?

January 17, 2017 3:28 pm

With a new year upon us, we start outlining our agenda for 2017 and think about the investment opportunities we look to pursue. Alternative investments are attracting more attention from investors and advisors as political uncertainty in key global markets increases.

Here at Impact Ag we felt it was timely to unpack the key fundamentals of agricultural investment, and over the next 5 editions we will cover the ‘5 tips to ensuring your Australian agricultural investment is a success”.

Funding and ownership structures in Australian agricultural investment remain largely unchanged since the early 1900s.

Reports show the demand for Australian agricultural produce is to increase by 77% by 2050, which is a growth of 1.3% per year.

The type of funding for agriculture and traditional ownership structures will need to evolve if Australian producers are to remain competitive. Innovation and expertise have attracted new capital to the agricultural industry resulting in productivity gains through technology and infrastructure.

With specialist expertise, land producing commodities are fast emerging as the ‘hot investment’, which is playing an increasingly significant role in many investment portfolios. Australian agriculture represents an enormous opportunity for investors due to the increasing capital growth of land and the global demand for the food and fibre it produces.

Why invest in Agriculture?

  • Offers important diversification to portfolios
  • Steady returns with less exposure to inflation than long term bonds
  • Negatively correlated to equities
  • Low relationship with economic cycles (people continue to eat even during downturns)
  • long-term prospects for positive yield and capital growth
  • It’s tangible, investors can touch and feel their investment
  • land stewardship will protect and enhance these assets.

Investing directly in agricultural assets provides the most exposure

Investing in both farmland and the farming business (the owner-operator model), provides investors with exposure to movements in commodity prices and land values, as well as operating efficiencies and improvements in productivity. Returns are generated by a combination of operating profits (from the operating business) and capital gains (from land ownership).

Right now, this sector remains locked in underinvestment, so there is opportunity here, considering the case of future demand. Some of the best long-term returns will come from agricultural investment. How is your portfolio positioned?

Currently, the majority of Australian farmers have little to no access to institutional investment and external sources of equity.

This has resulted in sometimes inevitable property divestments and the loss of human capital from the industry. But now, with food security front and centre of government, pension fund and private industry agendas, there is a noted increase in institutional capital looking to invest along the food supply chain.

Renewed and fresh interest in the agricultural sector from the investment community has highlighted the importance of making an agricultural investment a positive experience.

If you are evaluating agricultural investment or management CLICK HERE

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