Australia seeing agribusiness revolution – Colliers

Australia’s rural and agribusiness sector is being revolutionised by increased long-term investment, according to a report by farmland and real estate company Colliers looking at agribusiness in Australia and New Zealand.

The report adds that New Zealand’s viticulture, beef and sheep industries are gaining momentum.

In Australia, Colliers  sold 44 properties with over 552,000 hectares valued at more than A$282 million ($213 million; €182 million) in the 18 months to March. Forestry, cattle stations and olive groves were among the sales featured in the report, but water assets were also an important asset bundled into the sale of some of the properties. Cookoothama, a vine and olive property with water entitlements to 2,903 ml of water in the sale, was just one example.

In terms of markets, Colliers said large-scale almond and citrus assets in the country were a new driving force for investment, buoyed by fast-growing demand from China; between 2010 to 2015 citrus exports to China jumped from 400 tonnes to 29,500 tonnes.

However, Colliers featured beef and dairy as some of the most prominent investment attractions. Over the last year, beef has attracted big investors because of tailwinds from global demand, a weakening Australian dollar, a shortage of breeding stock and recent rains in drought-affected areas, according to the Colliers’ Research and Forecast 2016 report.

“The Australian dollar is expected to stabilise at current levels for the medium term driving continued demand for Australian beef in Asia,” it said. “This demand will also increase the need for reliable property to raise cattle, which in turn will positively impact medium-sized beef enterprises.”

As supply is reduced in 2016, properties with significant stocking rates will be most attractive to investors. It lists recent large-scale transactions, including the sale of 10,000-hectare Glencoe in New South Wales for around A$30 million, and 1,100-hectare Redfurn farms for A$8.1 million in December last year. The Redfurn property also included 3,019 litres of underground water as part of its sale.

Prices for water rights have been rising and are expected to remain high for the next year. The Australian water market’s increasing sophistication is driving the emergence of new water instruments, according to the report:

“The leasing of water and ‘forward delivery’ contracts are becoming more commonplace, allowing for alternative investment vehicles while also providing irrigators with alternate method of accessing water and in many cases moving water from a variable cost to a fixed cost.”

In Australian dairy, a new wave of investment across the supply chain has increased corporatisation in the sector. Investors here include Aquila Capital, as well as European pension fund-backed ACE Farming, Australia focused investment firm AAG Investment Management and the Australian Dairy Farms Group. Harvey Norman Holdings bought a 49.9 percent stake in Coomboona Holsteins for A$25 million, and has approvals in place to milk more than 3,000 cows. The biggest sale was Chinese-owned Moon Lake’s A$280 million acquisition of Van Diemen’s Land in Tasmania.

In New Zealand dairy, “long-term views on property purchasing in many established regions has outweighed short-term pricing concerns”, said Colliers. However demand drivers such as rising incomes and the relaxation of the one-child policy in China should mean growing export revenues in future. The report said that a number of properties that had been tightly held for generations were brought to market last year, and that steady purchasing from European and US investors is expected but that an increase in sales is not.