AUSTRALIA, along with Brazil and North America, were cited as key agricultural investment destinations during the annual Global AgInvesting conference held in New York recently.
BDO’s corporate finance executive director, Margaux Beauchamp was one of 700 participants at this year’s conference, which covered topics ranging from how the food and agribusiness industry is performing globally, why it is attracting greater attention as an investment target, portfolio considerations, where to invest in the food and agribusiness industry and the effects of the Trump administration on the industry.
In a report prepared by Ms Beauchamp outlining insights for Australia (access at base of page), she said there were a number of American institutions looking for Australian investments in excess of $150 million.
The conference suggested there was a trend towards institutions wanting to invest directly into food and agriculture entities, rather than investing via a fund, and an inclination towards investing along the supply chain in order to capture a higher margin and reduce variability.
Other insights for Australia from the event included the need for consideration, when optimising investment strategies in agriculture, in particular, of:
- Changes in consumer behaviour which result in food trends
- Changes in government policy including trade deals, import restrictions, and regulatory requirements including environmental considerations
- Opportunities for changes in land and water use with more intensive land use and greater efficiencies, and land and water flowing to the highest and best use
- Opportunities to adopt technology, and
- Industry consolidation and shifts in the value chain.
“The most investment enthusiasm globally was for protein and permanent crops,” Ms Beauchamp said.
The Australian agricultural sectors with the most investment appeal currently were beef and lamb in the protein segment, cotton, and permanent crops such as nuts, avocados, citrus, wine grapes and hops.
Australia was not considered to have a strong competitive advantage in wheat production.
Strong investment thesis for agriculture
During the conference, Ms Beauchamp heard private equity, venture capitalists and institutional investors give their perspectives on the state of the food and agribusiness industry around the world. Presentations considered some of the most pressing issues for agricultural investors and how to capitalise on the bright future ahead.
Among the presenters was Phillippe de Lapérouse, managing director of HighQuest Partners, who put forward a strong investment thesis for investment in the food and agribusiness industry around the world.
Key supporting factors driving attractive investment returns in agriculture were:
Population growth: Between now and 2050, the world’s population is expected to increase from about 7 billion to almost 9.3 billion people, an increase of around 35pc.
Increased urbanisation and the rise of the middle class: As incomes rise and populations become more urbanised, there is a shift towards more protein-rich diets, placing upward pressure on demand for grain and eventually farmland pricing.
Constraints on supply: Factors driving constraints on supply include: water access, climate change, linkage to energy markets (biofuel mandates), deceleration of yield increases, and environmental regulations on production.
Reduced production costs from adoption of technology and new analytics-based efforts: Evolving technologies are expected to play a significant role in improving the performance of agriculture. Opportunities to use technology to increase efficiency and productivity will transform agricultural processes, allowing farmers to have better control over inputs and resultant quality of production. For example, innovations via robotics, precision agriculture and other automation techniques are likely to contribute to reduced volatility and improved efficiency at the field level.
Consolidated Pastoral Co’s Troy Setter presented an Australian case study during the conference program.
- A summary of Margeaux Beauchamp’s observations from the Global AgInvesting Conference can be accessed here.
- Next week: NY’s Global AgInvesting conference asks the question: Why Australia for food and agribusiness investment?