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Foreign investment in Aussie farms is nothing unusual

Australian Farm Journal | 04 Oct, 2010

BY PATRICK FRANCIS

THE anxiety expressed in some farming quarters and the daily media about Australian farms becoming dominated by foreign corporations and governments fails to recognise that the coming and going of overseas investors has always been part of rural property transactions.

The 2010 Australian Farm Journal Who Owns The Farm review of property sales across Australia in the past 12 months reveals continuing foreign investment in farms but nothing extraordinary.

One area where concern about farm land purchase is justified is state governments and NGOs buying for conservation alone and the exclusion of agriculture. The latest Australian Bureau of Statistics data on land use across Australia shows that there has been a loss of 45 million hectares from agriculture since 2001 (455 million hectares to 409m ha). This loss is likely to accelerate if the MDBA’s Basin Plan removes too much water from irrigators in low rainfall districts.

The general real estate picture across the major broadacre farm sector is that the property market has plenty of willing sellers but not enough buyers. Pastoral stations, once the target of overseas investors, are proving difficult to sell with a number of indicator properties being listed for sale for 12 months or more. Realistic vendors have reduced their reserve to sell stations.

Cropping, mixed farming and higher rainfall grazing properties are selling at 2008/09 levels and buyers include family businesses, local investors and overseas interests. There are likely to be more sellers than buyers over coming months as older age vendors wishing to exit farming see the next six months as a rare opportunity to showcase their properties in the best possible condition.

Purchase of cropping farms shows both overseas and local institutional investors are active in this market. Apart from stimulating regional economies, investor ownership provides direct advantages to local farmers for contract services and employment on the properties themselves. Management positions provide career incentives to younger farmers, who may not be willing to tie up capital in farm land early in their working lives. Such opportunities are demonstrated by farm business investors like Warakirri Agricultural Trust, Agman Group, and the Sustainable Agricultural Fund. Despite these investors’ activity in cropping farm purchase in recent years, none operate close to the scale of family businesses owned by the likes of Ron Greentree and John Nicoletti.

It should also be noted that while some corporates are investing in farm land, others are selling it. The UK based Swire Group (owner of Clyde Agriculture, a Top 10 sheep and cropping operator) has all of its remaining stations and farms for sale. There are no guarantees in farming as shareholders for publicly listed AAco and Prime Ag can testify. In contrast, investment in publicly listed agribusinesses seems far more compelling.

World food trends reveal particular grains and meats are performing far better than others so western diet staples, wheat flour and beef, need a demand driven consumer focus to compete. When their indexed commodity prices and farmers’ terms of trade are analysed and put into context with Australia’s notorious climate variability, the desired returns on investment are not assured on a short term basis so private equity investor interest is likely to wax and wane. Under these circumstances the top 25 per cent of family farm businesses and investors with long-term horizons will continue to be a significant and successful part of Australian agriculture.

Full details of trends in farm purchases as well as who are Australia’s major beef, sheep and cropping farmers and the Top 10 landholders are in the October issue of Australian Farm Journal, out now at local newsagents or ring 1300 131 095 for a copy.

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