Sustainable Agriculture Fund reports A$4.9m in profits – update

Four superfunds and AMP Capital Investors are backers for the fund, whose managers say cotton, chickpeas and cattle were the main profit drivers.

The superannuation-backed A$160 Sustainable Agriculture Fund (SAF) made net profits of A$4.9 million ($3.8 million; €3.36 million) between June and December, according to AgCAP, the fund’s manager.

Last year SAF announced profits of A$4.7 million for the whole fiscal year ending September 2015, as Agri Investor reported. AgCAP is raising further capital for the fund, hoping to expand in line with its current operating capabilities, the firm also told Agri Investor.

Launched in 2009, SAF counts AMP Capital Investors, the Catholic Superannuation & Retirement Fund, Australian Super, Christian Super and Mine Wealth & Wellbeing (previously known as Auscoal Super) amongst its backers. It is one of the few agricultural funds in Australia to attract money from the country’s A$2 trillion superannuation industry.

The fund owns and operates grain, cotton, beef cattle and dairy farms across five aggregations in New South Wales, Victoria’s Western District, King Island and Tasmania. Profits this year were based on a good cotton crop at its Darlington Point farms, a strong chickpea harvest at its North Star aggregation, and  weight gains in the fund’s Angus cattle herd in Tasmania, according to AgCAP’s website.

“The North Star aggregation had a very good harvest and, in spite of a dry finish, produced above budget yields which, in the case of chickpeas, allowed us to capitalise on excellent prices,” chief executive Martin Newnham told Agri Investor, adding that cattle fertility had also given the fund greater livestock marketing flexibility.

He said the export market was an important aspect in the fund’s strategy, saying: “Because we produce core agricultural products with deep global markets our produce is always available sought after by exporters and the domestic market.”

Meanwhile the fund’s dairy-focused Cradle Coast Aggregation has faced difficulties because of low prices and hot weather, reported the Australian Financial Review. Low rainfall in New South Wales, where the fund grows wheat, barley, chickpeas, sorghum and cotton, also made conditions challenging.

But Newnham told Agri Investor: “We are still very positive about the dairy industry, particularly low-cost pasture based dairy in southern Australia. Our dairy assets have come through a period of subdued pricing and a difficult season and still generated good profits.

“In terms of risk management we made a number of proactive responses to the season such as increasing grain and securing depleting supplies of fodder[…]. The fund has historically participated in fixed pricing models provided by milk companies. The water assets on our farms have been a critical element to maintaining production through the dry period. Given where dairy is in the cycle we remain strong believers in the opportunities that the dairy sector presents.”

The firm’s previous chief executive, John McKillop, told Agri Investor in 2014 that it would raise a dedicated dairy fund, but last year decided to forgo the vehicle to focus on SAF.

Australian Super increased its commitments to the fund by over A$10 million between 2010 and 2011, the same year it committed funds to R M Williams Agricultural Holdings, which collapsed in 2013. It is not clear whether Australian Super have invested more in SAF since 2013, when it had $42 invested in the fund, according to its 2013 annual report.

Christian Super holds its investment in SAF in its Growth & Defensive Alternatives portfolio, alongside holdings in infrastructure, clean technology and renewable energy. Mine Wealth & Wellbeing, on the other hand, has placed the agricultural investment in its alternatives hedge funds portfolio. The Catholic Superannuation & Retirement Fund’s investment in SAF is part of its diversified portfolio.

The University of Melbourne Fund has also made commitments to SAF.