agCap GM, Livestock appointed to DairyTas Board

Originally posted November 17, 2016

agCap congratulates Wolfie Wagner, its General Manager, Livestock for his appointment as a member of the DairyTas Board. Wolfie replaces dairy farmer, Grant Rogers who has retired from the Board after six years.

DairyTas is a regional development program of Dairy Australia, the national services body for dairy farmers and the industry. DairyTas provides strategic direction and support for dairy research, development and extension for the Tasmanian dairy industry.

Wolfie Wagner has 30 years’ experience in the dairy and livestock industry at all levels including as a farmer, industry research and as a consultant. Wolfie oversees agCap’s livestock enterprises that are operated on behalf of the Sustainable Agriculture Fund.

SAF grows cash returns for a fourth year in a row

Originally posted August 3, 2017

The Sustainable Agriculture Fund (SAF) has delivered a strong full year return of 18.7% after fees and tax, benefitting from both strong cash returns and capital growth. Net farm profit excluding capital appreciation this year was $9.8m ($8.8m in FY2016). While global grain prices have been low, winter crop yields were high and beef production and prices combined to provide a stellar result for SAF’s King Island Aggregation.

This is the fourth year in the row that SAF has increased its net cash profit from its portfolio and demonstrates the benefits of SAF’s diversification. Chief Executive Officer, Martin Newnham explains: “Despite agricultural commodity prices and weather conditions varying year-to-year and region-to-region, SAF’s operating profit has been remarkably stable. This is the benefit of having a diversified portfolio. While some observers may express surprise at the consistency given the well-known risks our performance in actual fact bears remarkable resemblance to the performance of the ABARES benchmark that the portfolio design sought to emulate.”

However, this is only one side of the story, with continual improvement an objective for agCap. “Growth in profits and farm net profit margins year-on-year is no accident. It is directly related to our pursuit of productivity and efficiency gains in every facet of our portfolio. Individually, such gains may be small, however collectively, they add up and deliver meaningful value to our investors,” explains Deo de Jesus, General Manager, Strategy.

The Sustainable Agriculture Fund is currently being offered for sale. CBRE are managing the sales process with offers due to be received in early August.

 

Investors/Buyers sought for Sustainable Agriculture Fund

Originally posted March 29, 2017

agCap has appointed CBRE as agent to sell the Sustainable Agriculture Fund (SAF) on behalf of its Australian institutional investors. CBRE will run a marketing program seeking expressions of interest for all or parts of the assets and/or all or part of the units in the Fund.

 SAF is a portfolio of 17 farms organised into 5 aggregations, that operate broadacre cropping, irrigated, beef and dairy enterprises. With over 23,000 hectares of land, located in diverse geographic regions across eastern Australia, SAF provides interested parties access to farming operations of significant scale and also diversity. ABARES have recently released its annual survey of returns for all broadacre and dairy farms in FY2016. This data confirms that SAF has delivered top quartile performance in the three years ending FY2016, with FY2017 anticipated to also deliver top quartile performance.

 The Fund has a completed a fixed 7.5-year term and during that time, agCap deployed $145m, acquired over 27,000 hectares of land and invested to increase the productivity of each aggregation. In addition to delivering top quartile sustainable performance, a high performing management team has been built to run the farms in accordance with a well-developed operating strategy and associated systems.

 The decision to put the assets on the market was a unanimous decision by all investors and will provide an opportunity for all investors to realise the value achieved by the strong investments made on each of the farms to increase productivity, while providing purchasers an opportunity to benefit from the next phase of growth.

 Chief Executive of agCap, Martin Newnham explains: “Our foundation investors should be recognised for being pioneers in this sector and for their commitment since 2009. The SAF portfolio was very well constructed and in recent years delivered our investors steady income returns, capital appreciation and annual distributions. These are very good assets that still have development potential. The interest we are receiving indicates the sales process will be highly competitive.”

 The offer is being pitched widely and expressions of interests are sought from parties for any or all of the assets and any or all of the units in the Fund. Deo de Jesus, General Manager, Strategy explains: “We understand that there will be some parties that will be interested in individual assets, while there will be others that are interested in the fund as a going concern. By keeping the marketing process as wide open as possible we are seeking to extract full value for the foundation investors”.

Mainland Dairy Farmers see how it’s done in Tasmania

Originally posted January 27, 2017

This week, a group of dairy farmers from south-west Victoria and south-east South Australia toured Tasmania as part of an irrigation study tour. The group was very diverse, comprising both the new and old generation of farmers and operating farms from 250 to over 2,000 cows. The group gained an appreciation for the different growing conditions and farming methods applied in Tasmania.

As part of this tour, the group visited Blythe Vale, one of the Sustainable Agriculture Fund’s dairy farms. This high performing farm is operated by Wayne and Caroline Saward, who have been finalists for Tasmanian sharefarmer of the year for the past two years.

The group not only saw first hand agCap’s involvement in the national irrigation efficiency research project, but also got a better understanding of how agCap operates and its approach to sustainable dairy farming.

agCap understands the benefits of visiting different farming regions. Each year, agCap sends its sharefarmers to different regions to gain further insights.

SAF diversification delivers consistent and competitive returns

Originally posted January 23, 2017

The Sustainable Agriculture Fund (SAF) has delivered a strong half-year net profit of $3.7 million to the period ending 31 December 2016. While the Fund’s performance is as strong as last year’s half-year result ($4.9 million), the longer growing season extended the winter crop harvest into January meaning some of this profit will be recognised in the second half. agCap anticipates SAF’s full-year results will be as good, if not better, than the previous year. This is reflected in SAF achieving a one-year total return of 12.7% before fees and 10.6% after fees for the year ending 31 December 2016.

Martin Newnham, Chief Executive Officer of agCap explains: “Following a $10 million distribution to investors in September 2016, SAF has quickly restored its cash position, highlighting the strong cash generation characteristics of a diversified broadacre portfolio. With a high proportion of land, low depreciation and capital expenditure requirements, high payout ratios are an additional benefit to the low-risk capital apprecation of the land.”

At June 2017, SAF will have completed its 7th full financial year of operations and its 6th year since it has been fully invested. In this time, the Fund has been on a journey and has steadily increased its year-on-year performance and is now delivering consistent returns to investors.

Martin Newnham continues: “Our investors are now being rewarded with SAF being in the top 25% of returns for all Australian broadacre farms over the past three years and with our half-year result we expect to again be in the top 25% for a fourth year in 2017. This is a testament to our highly capable and experienced team and systems that we have implemented. Disciplined asset acquisition delivered a good result early in the fund’s life and we now anticipate SAF to have been in the top 25% in five out of the seven years it has been fully invested. agCap’s 2-year and 3-year compound average return before fees of 10.3% and 7.7% reflects this consistency.

A key factor in SAF being in the top 25% is the diversification of the SAF portfolio. This enables SAF to more closely track the performance against the broader Australian benchmark, while also adding value to the portfolio through the benefits of institutional management.

Deo de Jesus, General Manager, Strategy explains: “The SAF portfolio has been specifically designed to provide the same risk exposure as Australian broadacre benchmark published by ABARES. This benchmark has over 30 years’ of history delivering returns that are comparable to other asset classes.”

“This is not surprising as we would expect in a competitive investment environment for arbitrage to narrow any gaps. In addition, what Australian broadacre agriculture provides is an asset class that behaves differently to other asset classes. This is valuable and is something that our investors have been enjoying.”

“This diversified agriculture portfolio has taken some time to build and develop, coupled with an investment and operating strategy that has been specifically designed to meet the needs of the portfolio. This will be difficult to replicate and represents significant value to investors.”

King Island Aggregation recognised for beef quality

Originally posted November 15, 2016

Last week, JBS Australia held their annual producer forum in Tasmania. At the forum the Sustainable Agriculture Fund’s King Island Aggregation was recognised as being in the top 10% of producers that supply JBS Longford for meat quality.

agCap has well developed systems and protocols for preparing cattle for processors and this recognition not only illustrates this, but also the commitment and hard work of the King Island Aggregation team in producing high quality beef cattle.

The King Island Aggregation participates in the JBS Farm Assurance programme. This independently verified program is aimed at delivering food products that are fresh, wholesome, and safe and have been produced under acceptable animal welfare practices.

The King Island Aggregation is part of the Sustainable Agriculture Fund and is owned by Australian superannuation and institutional investors.

 

 

agCap brings the community to the farm

Originally posted November 10, 2016

As part of the 2016 Coleambally Food and Farm Festival, agCap was proud to not only sponsor the festival but also host farm tours for the local community.

A diverse group of 45 people spent time visiting the Sustainable Agriculture Fund’s Tubbo Irrigation farm, as well as other local farms including Wiseman’s organic farm, the Murrumbidgee Shire’s demonstration farm and morning tea at the historic Tubbo woolshed. The purpose of the tour was to give the community an insight into the sustainable agriculture activities undertaken in the district and to demonstrate agCap’s passion for producing high quality agricultural products in an environmentally sustainable manner.

At the Festival dinner, Tubbo Irrigation Manager, John Durham, was able to provide some insight into agCap’s farming philosophy, which values creating sustainable communities, rewarding careers and delivering long-term sustainable returns for its Australian superannuation investors.

agCap sharefarmer receives award for quality milk

Originally posted October 27, 2016

agCap would like to recognise the achievement of Ji Streets in receiving a Milk Quality Award from Dairy Australia. The award is provided to dairy farms that were in the lowest 5% of farms across Australia for annual average bulk milk cell count (BMCC), a measure of quality of milk produced. Dairy cows with lower BMCC are generally able to produce more milk, being a positive driver for farm profitability.

Ji Streets is the sharefarmer for the Midlothian farm, which forms part of the Cradle Coast Aggregation. The farm is part of the Sustainable Agriculture Fund and is owned by Australian superannuation and institutional investors.

agCap is proud of Ji Streets and the other agCap sharefarmers for their commitment and passion for dairy farming. Ji was able to achieve this award on a farm milking 540 cows. This is almost double the national average herd size of 284 cows.

agCap declares $10m distribution to SAF investors

Originally posted August 26, 2016

The Sustainable Agriculture Fund (SAF) has enjoyed a strong year, delivering a total before tax return of $13.4 million. Underpinned by strong cash operating returns, agCap as trustee of SAF, has declared a distribution of $10 million for its Australian superannuation and institutional investors.

Once again, SAF’s diversification and approach to farming has proven a benefit for investors. Strong performance at its New South Wales’ grain and cotton enterprises and its King Island Beef operation offset the difficult operating conditions at its Tasmanian dairy and Victorian cropping enterprises.

Martin Newnham, Chief Executive Officer of agCap said: “SAF’s returns have held up really well despite difficult seasons and market prices for some of our commodities. This has really vindicated our diversified portfolio approach and our farming philosophy, which is about taking the best of the family farming model and overlaying it with good governance and financial discipline.”

Sales results have also reflected the strength in rural land prices. Deo de Jesus, General Manager, Strategy: “Sentiment is good for the sector. Last year we foreshadowed improving asset values with a continuation of a lower Australian dollar and recent increases in asset values has supported this view”.

agCap anticipates continued strength in rural land prices. “We expect there to be further catch-up in land prices after the flat period at the start of this decade. We anticipate the benefits of the free trade agreements entered into in the last couple of years will support land prices, particularly when the cycle turns in the wheat and dairy sectors.

There is now an opportunity for institutional investors to invest in SAF. Martin Newnham explains: “We have supportive foundation investors that would like to remain and indeed grow their investment in SAF. However, there are other investors for their own internal reasons have asked us to test the market.”

Owned by Australian institutional investors, SAF has a diversified portfolio of agricultural assets that operate along Australia’s eastern seaboard, including grain, cotton, dairy and beef enterprises. SAF provides investors with exposure to land-rich Australian broadacre cropping and livestock sectors. Well managed agricultural investments have demonstrated benefits to investor’s portfolios through their inflation hedging characteristics and low correlation with traditional asset classes.

SAF delivers farmland profit for super funds

Originally posted September 4, 2015

SAF has delivered a $4.7 million full year profit in addition to capital growth for its superannuation investors in FY2015.

Explaining the results to Australian Financial Review’s Matthew Cranston, Martin Newnham said: “Excellent farming practices capitalising on good growing conditions and favourable commodity prices have led to the strong result”. In particular, SAF benefited from good yields on cotton crops at Darlington Point, weight gains and strong market conditions at King Island, and yearly productivity improvements at SAF’s Tasmanian dairy farms.

Diversification also played a role in SAF’s returns given SAF’s North Star Aggregation and Western Victoria Aggregation experienced rainfall at multi-decade lows. Martin explains, “While we do not export all our farms to be earning record profits all the time, it was a particularly dry year at our largest aggregation in northern New South Wales. Our strong profit result demonstrates the benefit of the fund’s diversification strategy versus single commodity or region exposure”.

The medium term trajectory for SAF remains strong. With the improved outlook for the industry as a consequence of the low Australian dollar and free trade agreements opening up export markets, agCap improved profitability will begin to be reflected in asset values after a historically flat period for asset prices.

agCap works with foreign investors

Originally posted December 11, 2014

agCap’s CEO, Martin Newnham explained the benefits of foreign investment in Australian agriculture to The Australian on 11 December 2014.

In addition to managing farms owned by the Sustainable Agriculture Fund (SAF), agCap also manages two properties leased by SAF from US global agricultural fund Westchester.

“They own the land and provide the capital and we effectively lease it from them and provide the local expertise and management” explains Mr Newnham. “We have our own local farm managers and use local contractors so there is a real benefit for rural communities; but it’s their money that ensures the properties are beautifully presented, maintained and run to the highest occupational health and safety and governance standards – that’s what capital brings.”

Foreign and other institutional investment also brings the advantages associated with corporate management. This includes capital management discipline and access to a wide range of resources in production, planning and marketing. These advantages bring productivity benefits and a capability of managing agricultural assets sustainably for the long-term.

Investments managed by agCap benefit from their deep local operating expertise, experience working with Australian and foreign institutional investors, and strong knowledge and access to opportunities in the Australian agricultural sector.

Investors Queuing for Elusive Dairy Farms

Originally posted August 18, 2014

MORE than half the guest list for the inaugural Australian Dairy Farm Investment Forum in Melbourne next month are ­corporate or Chinese investors, but with the dismal level of dairy farm funds on offer they may miss out on deploying their capital.

The forum’s chairman, Dairy Australia director John McKillop, confirmed the overweight enrolment of such ­investors, who are seeking to be matched with advisory groups to find dairy land investments.

“We have had a lot of brokers call us up asking why there are not enough dairy farm vehicles for them to IPO,” Mr ­McKillop said.

However, he said that until now mainstream investors such as Australian super funds had found it too difficult to invest because of their own governance constraints. Without such investors, starting up dairy land companies was almost impossible.

“Dairy has been a difficult play for super funds who have to report their earnings quarterly; but as they seek further investments in the alternative asset class agriculture has to be part of that.”

Now, in the sudden realisation of demand for dairy production, especially from China, premiums are being paid for processors Warrnambool Cheese and Butter, Pactum Dairy Group and Harvey Fresh. That has led investors to start demanding positions in new vehicles that own the land underlying such production.

Bell Potter Securities’ Darren Craike has been raising money for the Australian Dairy Farms Group, which will list on the ASX in October. The fund will own two dairy farms near Warrnambool in south-west Victoria and plans to buy 14 more. Increased demand for land companies

“There has been an increase in demand for agricultural land companies but in the last five to 10 years the options have diminished significantly because of takeovers and M&A,” Mr Craike said.

He said many investment-grade agricultural land companies had bought property at the wrong time in the cycle and that there were other challenges in creating land vehicles because of the stigma attached to managed investment schemes.

“Another challenge is properly aligning vendors’ interests with shareholders’ interests.”

However, he is optimistic about the fund’s future. “It is clear that institutional investors share our view that there is a significant opportunity to consolidate Australia’s fragmented dairy sector.”

Other investors are not too sure. Kidder Williams managing director David Williams still has considerable doubts when it comes to agricultural land companies. “It is common for property trusts to trade at a discount to asset backing,” Mr Williams said. “So let’s see now: how will a rural property trust go with low yields, subject to weather, labour, world commodity prices and all the other difficulties of making money on the land? That is a tough ask.”

A number of other dairy farm companies have been quietly building up portfolios. ACE Farming Company, formerly owned by Valad Property Group and run by Jeremy Bayard, expanded its portfolio in northern Victoria again this year.

That company now has 11 farms, including nine in Gippsland, and is ­currently owned by an investor represented by Singapore-based Duxton Asset Management.

Other difficulties in gaining access to farms include strong family ownership and the co-operative model.

Norco chief executive Brett Kelly said anyone can own dairy assets but the crucial thing to get right is management of the farms.

“You have to be very careful when you corporatise farms,” he said, “Co-ops are a lot better model. With co-ops you can get volume and good prices, and then all the members can go to their banks and talk about growth and expansion.”

GDRC Review Calls for Change

Originally published in The Land – 11/8/14
Written by Gregor Heard

An independent review into the governance of the Grains Research and Development Corporation (GRDC) has recommended the current government-run model needs to change.

Economic consultants Marsden Jacob completed the report for Grain Producers Australia (GPA), the current grower organisation responsible for overseeing GRDC as part of its role as the representative organisation (RO) under the Government Primary Industry and Energy Research and Development (PIERD) Act.

The report has advocated a major shake-up in the structure of GRDC, saying a move to either an industry-owned model, similar to those of Dairy Australia or Meat and Livestock Australia (MLA), or a hybrid model with increased industry-owned features in the current statutory model.

GPA chairman Andrew Weidemann said the review was about finding the structure for GRDC that delivered maximum efficiency to growers.

“Growers have called for this review to ensure that the structure of the GRDC is best placed to deliver the benefits their businesses continue to require,” he said.

Almost all the major grain grower organisations have participated in the governance review.

Chairman of the Western Australian Grains Group (WAGG) Doug Clarke said his group was advocating a change in the way GRDC was run.

“It is time for the GRDC to transition to an unlisted public company, limited by guarantee,” he said.

He said WAGG believed the current Statutory Corporation system had run its race and if left to continue would become increasingly inefficient.

“The new legislation will cause the GRDC to increasingly become more bureaucratic, less flexible, less responsive and less able to support innovation in its current guise.”

He said a WAGG model would have proportional voting by levy payers and would be based in Adelaide.

Mr Weidemann said the next step in the process would be getting grain grower groups together in September to develop a response to the report.

“We encourage all grain farmers to contact their representative organisation with their view on the report so that these discussions are thoroughly informed.”

Research into Water Efficiency

Originally posted May 19, 2014

Cubbie Ag, in conjunction with a number of companies is currently conducting field trials in regard to establishing a mono-layer over water storage surfaces to reduce evaporation losses from its storage system.

To date Cubbie Ag has constructed its storage system to the maximum depths allowed by law. This ensures the minimum in surface area prone to evaporation. The company’s storages are structured so that as the water levels reduce, water can be moved from one storage to another, again reducing surface area and therefore reducing evaporation.

Since 1994 we have continually focused on water efficiency measures in crop production. The need to monitor and then manage in order to maximise water use efficiency is vital to sustainable farming. New technology, such as C-Probe moisture monitors and advanced telemetry, allow us to real-time monitor irrigation placement, and timing and to visualise crop moisture usage. This technology has made total integrated water management possible.