Financial Review | 31 Aug, 2015
Ag pays off for super-backed fund
THE Sustainable Agriculture Fund, backed by Australia's biggest superannuation funds, has delivered a $4.7 million full year profit and recorded a small rise in the value of its rural property holdings.
The fund, which owns more than $150 million worth of cropping land, dairies and premium King Island beef operations, has investors such as AustralianSuper, Australian Catholic Superannuation and Retirement Fund and Auscoal Super.
The stand-out result will see the fund make a distribution for the third time in the five years since the fund's inception in 2010.
The fund is managed by Melbourne based AgCAP, which is owned by Lempriere Capital Partners and the chairman of the Australian Football League, Mike Fitzpatrick.
AgCAP chief executive Martin Newnham confirmed the fund's financial result and said the fund would seek to raise further capital and expand its rural property holdings around its current operations in NSW, Victoria and Tasmania.
"Excellent farming practices capitalising on good growing conditions and favourable commodity prices have led to the strong result," Mr Newnham said.
"We are now very keen to grow the fund around the existing assets and get new capital. We will be looking to Australian institutions and these sorts of [financial] results will help us. The sentiment around agriculture is also strong."
Mr Newnham said that while there had been some criticism about the level of investment by superannuation funds in agriculture - a mere 0.3 per cent of all superannuation, according to a study by the University of Queensland - further superannuation investment was likely.
He said the medium-term trajectory for the sector was strong, especially with the benefits from the Abbott government's new free trade agreements.
"With the improved outlook for the industry as a consequence of the low dollar and the free trade agreements opening up export markets, we expect this will begin to be reflected in asset values after a historically flat period over the last four years."
The fund recorded an additional $2.9 million increase in the value of assets above the $4.7 million underlying profit. "We achieved very good yields on cotton crops at Darlington Point in NSW, good weight gains and strong market conditions on our King Island beef operation, and yearly productivity improvements at our Tasmanian dairy farms continue to stabilise performance and set up for above benchmark future returns to investors," Mr Newnham said.
The fund's 9710-hectare northern NSW aggregation and its 8936-hectare western Victorian farm aggregation, which includes farms leased from US global agricultural fund Westchester, saw multi-decade lows in rainfall resulting in lower yields on some crops.
"While we do not expect all our farms to be earning record profits all the time, it was a particularly dry year at our largest aggregation in northern NSW. Our strong profit result demonstrates the benefit of the fund's diversification strategy versus single commodity or region exposure."
The fund's manager for strategy and investments, Deo de Jesus, said management was expecting continued improvement in income and capital returns. "The weakening Australian dollar has provided a welcome boost to commodity prices across the board. While beef prices are particularly strong, with good returns expected from our King Island operation, our dairy farms in Tasmania are expected to continue to perform strongly despite low global dairy prices," Mr de Jesus said.