Rural Funds Group continues macadamia push as revenues increase

Rural Funds Group has agreed to lease two of its cattle properties to Australian Agricultural Company, one of Australia’s oldest and largest beef producers, while simultaneously continuing to expand its macadamia orchard developments.

Rural Funds Management, which is the responsible entity of the Australian Securities Exchange-listed Rural Funds Group, gave an update to investors last week while announcing financial results for the half-year ending December 31, 2021.

The firm said the first stage of its macadamia orchard development plans, whereby it will establish 1,000 hectares of orchards in Rockhampton, Bundaberg and Maryborough, Queensland, is on track to materially complete by the end of FY22, with 375ha completed to date.

RFM managing director David Bryant said in a briefing to shareholders that the firm is in active discussions with entities over leasing its macadamia orchards.

“As the orchards mature, it becomes more obvious to people that visit them that they are going to make money and they are closer to generating cashflows for a lessee. Interestingly, the main profile of potential lessee we are encountering is institutional investors rather than people in the nut trade,” he said.

“The evolution of agriculture in Australia [is such that] the pension funds have now identified it as an opportunity – particularly the North American pension funds, but there are others. We are confident that, in an appropriate amount of time, we will have announcements regarding lessees which will enable us to continue with the full 5,000ha of development.”

RFM also announced that the ASX-listed AACo has entered into a 10-year lease of its Comanche and Homehill cattle properties, commencing in May 2022. AACo will also background cattle on other unleased Rural Funds Group properties while productivity developments progress on them.

Bryant added that the firm was considering ways of making additional revenue through the sale of carbon credits.

“We’re really interested at looking at ways of making profits from providing sustainable food systems, and generating carbon credits is part of that,” he said.

“There have been some changes, such as in the EU that will enable [investors there] to buy Australian carbon credits. The EU carbon credits trade for about A$150 ($108; €96) per tonne – the Aussie ones, which are recognized as high-quality carbon credits, trade for about A$55 per tonne. That’s up from A$18, so it has increased quite a bit, but we see a lot of upside in the value of those credits.

“We’re looking at how we can best generate carbon credits on our assets, what investments we can make to generate those carbon credits… and we’re looking at some of the low-hanging fruit, like methane and nitrous oxide emissions, where we can abate those. I’m really optimistic that there are money-making ways for RFF to assist with sustainable farming – and we’re only interested in producing high-quality, reliable carbon credits.”

Overall, the firm reported that property revenues rose to A$34.9 million, up from A$33.9 million in the same period in 2020.

The total adjusted value of its property assets now stands at $1.3 billion, up from A$1.1 billion on July 1, 2021, following the acquisitions of The Pocket and Coolibah cattle properties for A$19.5 million. The firm also acquired the Baamba Plains cropping property for A$70.9 million, two mature macadamia orchards (Beerwah and Bauple) for A$58.2 million, and made property revaluations of A$17.6 million.

Its adjusted funds from operations per unit was A$0.058, on track with its forecast for FY 22, and its adjusted net asset value per unit was up 3 percent on FY21, at A$2.24.