The time to invest in Australian agriculture is now, according to a recent research note from Abacus Emerging Markets, the Anglo-Australian specialist investment bank.
Abacus EM, which received financial services authorisation at the beginning of the year, chose agriculture as one of its four core sectors of focus and is working on cross-border investment opportunities in Australia.
In the wake of Australia’s free trade agreement (FTA) with China, Abacus believes there could be a race for the country’s most attractive agricultural assets and off-take contracts pushing prices upwards even before the FTA comes into effect after 2015.
“Given the magnitude of Chinese food-security needs, demand and investment flows will be significant and should result in fierce competition with investment from other regions similarly facing food security issues (such as the GCC and other investors in agriculture),” reads the report.
The note goes on to analyse China’s food security needs and the drop in its self-sufficiency rate to 88 percent in 2012 from 98 percent in 2010.
“Much of the emergence of recent supply-demand gaps is due to the increased consumption of animal products and development of China’s livestock industry,” reads the report. In 2012, the most notable shortfall was in dairy followed by mutton and beef.
“Supply-demand gaps will become much more pronounced by 2030 at which point self-sufficiency will have dropped to 76 percent for dairy products, 86 percent for mutton and 94.6 percent for beef.”