

Southeast Australian dairy farms are starting to look increasingly attractive to investors due to a pricing gap with similar farms in New Zealand, fund managers tell Agri Investor. But the degree of interest among them varies. Here a range of fund managers give their views on the topic and the opportunities the region’s dairy industry does, or does not, provide.
Stuart MacDonald, managing director, Aquila Capital:
We expect the pricing gap between Southeast Australia dairy farms and like-for-like farms in New Zealand to close fairly soon so we want to make the most of this opportunity as soon as possible. Australian farm values are depressed due to large amounts of leverage on their books which we will recapitalise. There is also upward pressure on the global milk price due to rising Asian demand and supply constraints in Australia and New Zealand which means that exported Australian milk is likely to be sellable at European and US prices providing attractive returns.
Reza Vishkai, head of specialist investments group, Insight Investments:
There are reasons why Southeast Australian dairy farmland is priced a lot lower than similar New Zealand farmland including less cooperative weather and an expensive labour force. The Australian market is much more fragmented too whereas New Zealand dairy farms have the benefit of the world’s largest dairy processor – Fonterra. We think that South Australian dairy farms are a good investment opportunity especially as debt pressures generally provide good buying opportunities, but we don’t think we will lose out if we wait a while longer to take advantage of this opportunity.”
John McKillop, managing director, AgCap:
New Zealand’s efficiency in dairy production is well recognised, as much as anything it is an attitude towards success in the dairy sector. We see a similar “can do” attitude emerging in the Tasmania industry and believe that with the assistance of the milk processors and sensible investment, Tasmania will become a significant low cost producer of high quality dairy products over the coming decade.
Tim Hornibrook, head of Macquarie Agricultural Funds Management:
At present we are focussed on the beef-cattle sector in preference to dairy. We find the demand and supply dynamics more compelling given that it is difficult to see a meaningful increase in the beef supply in the short to medium term.