2014 marks a turning point for Rural and Agribusiness

Australia and New Zealand’s agricultural commodities are facing a positive outlook this year with many agricultural regions on the road to recovery after experiencing the bottom of the market, according to the latest Colliers International research.

As stated in the Rural and Agribusiness Research and Forecast Report 2014 the best performing rural enterprises are Australia’s poultry sector and New Zealand’s dairy sector, both of which are significantly growing and stimulating the property market.   

Tim Altschwager, National Director of Rural and Agribusiness at Colliers International said the change is influenced by an improving global economy and seems to be based on increased food demand and an improved availability of finance.

“The poultry sector is arguably the best financially performing agribusiness enterprise in Australia, currently based on the projections which show that chicken meat is to remain Australia’s most consumed meat in the medium term,” said Mr Altschwager. 

“This demand is creating passive investment opportunities for acquisition of assets on sale and leaseback models for long terms of 10 to 20 years with double digit yields.  

“Syndicates of private investors are developing and owning the new-age broiler farms producing millions of chickens per annum. Sophisticated investors have the opportunity to take a larger share of the market, with 70 per cent currently owned by two processing companies Ingham and Baiada.”

Mr Altschwager said the dairy market is strong in New Zealand and improving in Australia with more than 40 per cent of Australian milk production exported, mainly as powder or processed product, driven by Chinese demand in particular.

“At present there is good value in most dairy regions. Lower asset values and higher milk prices will ultimately support and drive profitability. We anticipate activity in the next 12 months as investors seek to get a foothold in the Australian dairy industry. 

“New Zealand is set for another bumper year with continued domestic and offshore investment, especially in the dairy sector. Overseas buyers for both forestry and farming assets are seeking opportunities as major North American, European and Asian funds look to take advantage of the country’s safe investment status and proximity to protein hungry Asia,” said Mr Altschwager.

Over the last 24 months the cotton industry has experienced record production levels and a number of property transactions have occurred particularly in the Murrumbidgee Irrigation Area (MIA).

“This region is experiencing demand for properties due to a lower capital cost of land when compared to cotton farms in northern regions, typically higher water security and similar yields. The MIA is also experiencing significant growth in ginning demand. 

“China is stock piling cotton for future production, increasing the demand for cotton textiles which in turn makes them the largest importer of Australian cotton, accounting for 68 per cent of our total production.” 

Mark Courtney, Director of Research at Colliers International said the beef sector has been influenced by the drought with the eastern young cattle indicator (EYCI) tracking below average for the last five years. 

“Although excess supply has been compounded by poor seasonal conditions leading to below pre-GFC levels and a number of distressed assets on the market, it is important to note that gains have been made in the first half of 2014. 

“Furthermore, as most of the receiver stock is selling, the increase in transactional activity and competition in the market is leading to a slight rise in confidence.

“Demand for exports of boxed beef to China is occurring at a rapid rate with 1,093 per cent growth and a total of 92,279 tonnes reported by MLA for the 2012/13 financial year. The Northern Territory has seen more sales in large scale beef enterprises, such as Riveren & Inverway Stations with total carrying capacity of 40,000 head, which was purchased by JAPFA Santori; and La Belle Downs & Welltree Stations with total carrying capacity of 22,000 head that was purchased by AA Co.”

Mr Courtney said wine industry assets are still near the bottom of the cycle presenting an opportunity for cashed up, counter cyclical investors to take advantage of low entry costs. “At current asset values Australia’s wine industry sector represents the greatest potential for capital growth over the longer term.

“The most sought after assets are vertically integrated business in strategic locations, such as the Barossa Valley. 

Mr Courtney said that the Australia and New Zealand agribusiness sectors are growing increasingly attractive to international funds due to unstoppable global demand for food.
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