The outlook for the Australian Agribusiness sector remains positive this year, partially due to its non-discretionary nature and its highly important role of ensuring Australians have food on their table throughout the COVID-19 outbreak.
The Colliers International Agribusiness Research and Forecast Report for 2020 found that the sector is supported by the growing worldwide population; the affordable nature of Australian land values compared to other countries and the increasing worldwide demand for Australian high-quality food production.
“Despite the negative economic conditions and market uncertainties, we know that demand for food will never cease which provides a bullet-proof scenario for the Agribusiness sector, supports its long-term financial sustainability, and positions the sector as a key driver of the recovery process for society and the economy,” said Alex Thamm, Head of Agribusiness Valuation and Advisory Services at Colliers International.
“IBISWorld industry research forecasts a gradual increase of agricultural output volumes over the medium term, underpinning a forecast annual growth in agribusiness revenue of 1.6 per cent, from $282 billion in June 2019 to $305 billion in June 2024.”
Colliers’ report found that apart from weather conditions and natural disasters, divergent factors are forecast to continue influencing the outlook of the Australian agribusiness sector in 2020.
The recently endorsed Indonesia-Australia Comprehensive Economic Partnership Agreement is expected to facilitate export activity to Indonesia, with the beef, wheat and sheep industries being three of the main winners due to the automatic issue of import permits. The removal of tariffs on 99 per cent of selected Australian goods will also be beneficial for various agribusiness operators.
Karina Salas, Associate Director, Research said, “Australia’s case for agricultural prosperity is well known due to its proximity to Asian markets, its stable political structure and transparent legal system. The low exchange rate of the Australian dollar is also another factor improving the competitiveness of the sector internationally and supporting a positive outlook this year.
“Taking into account the increasing demand of Australian agricultural products, good rainfall events across significant areas of the country in 2020 and generally strong commodity prices Colliers International forecasts general value stability with possibly some firming of rural land values in selected sectors in 2020."
From a capital investment perspective, the report revealed that the Australian agribusiness sector has become a solid alternative investment asset for institutional investors looking for long-term returns and portfolio diversification.
However, family farms continue to dominate the market due to their deep-rooted standing and sector know-how. The new FIRB rules requiring approval for all foreign investment transactions during the COVID-19 outbreak provides the opportunity to the Australian superannuation funds to expand their investment in agricultural assets.
The Agribusiness Research and Forecast Report found that the Australian volume of agribusiness sales (above $5 million) increased by 30% in 2019 to reach $4.3 billion compared to $3.3 billion in 2018, recording the highest level of capital investment in 2019.
“The Queensland market attracted the largest 2019 capital on farming properties across Australia of $1.3 billion off the back of over 90 transactions,” said Rawdon Briggs, Head of Agribusiness, Transaction Services at Colliers International.
“Meanwhile, Victoria remained the second largest farmland investment market in Australia for the second consecutive year, reaching an estimated volume of sales of $1.2 billion in 2019, while investment volumes on farming land in NSW reached $1.1 billion, underpinning over 25 per cent of the annual capital investment across Australia in 2019.”
The outlook of the Agribusiness investment market in 2020 is steady and largely driven by the consistent increase in demand for quality agricultural product. The clearly recognised investor comfort displayed by private and institutional investors who partner with reputable farmers nationally, all of which have a long-term investment horizon of farmland as a stand-alone asset class globally, said Mr Briggs.