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Agriculture investments to outpace bonds and equities – update

New figures show that American farmland is expected to perform better than equities and bonds over the next 10 years and it is hoped Australia will follow suit.

**add attribution of Morgan Creek data and Cambridge Associates presentation to the Global AgInvesting Conference in New York.

Agricultural investments are expected to outperform bonds and equities in the US by up to 8 percent over the next decade, according to data released by investment advisor Morgan Creek Capital Management at the Global AgInvesting Conference in New York last month.

While bonds and equities are expected to return 3 percent and 5 percent respectively, returns from farmland are likely to average 11 percent, said Morgan Creek at the conference.

“Figures like this demonstrate the growth potential in agricultural earnings compared to traditional strategies, and shouldn’t come as a huge surprise to those close to the industry, given a report presented by Cambridge Associates [during the GAI conference] that showed the growth in value of agriculture assets in recent decades has matched or exceeded other asset classes,” said Margaux Beauchamp, corporate finance executive director at BDO Australia, the global audit, tax and advisory firm.

The challenge now is for Australia’s agriculture sector to perform as strongly as the American sector over the longer term.

“If our local agricultural investments can outperform Australian equities and bonds it will set the industry in good stead to attract the A$1 trillion ($930 billion; €683 billion) in capital investment that ANZ estimates is needed for production growth and farm turnover between now and 2050,” she explained.

“The opportunity for Australian agriculture is to double the real value of annual agricultural exports by 2050 to capture an additional A$710 billion in revenues.”

She notes however, that while agri investment appetite is clearly growing, it’s still going to be a challenge for the sector to realise its full potential.

“The global growth in investor interest that the agriculture sector is experiencing is not translating into large increases in institutional investment in agriculture, with the sector still representing less than 1 per cent of assets in many investment portfolios,” she said.