THE rural and agribusiness sector is now included in investors’ long-term strategies as the sector develops hallmarks of high investment-grade assets, according to the latest Rural & Agribusiness research and forecast report issued by Colliers International.

Colliers’ national director of transaction services, Shane McIntyre, said the falling A$, Free Trade Agreements with major Asian partners and the overarching driver of food security had had a discernible impact on the market, with a number of rural regions and sectors beginning to experience growth in land values.

“Investors are drawn to rural and agribusiness assets in pursuit of stronger yields, as the market becomes short of opportunities in traditional asset classes,” Mr McIntyre said.

“The momentum is expected to continue into 2016 as we experience growth in enquiry at all levels,  ranging from the private landholder through to institutional investors.”

“We are also seeing an emergence of third parties who are financing production with no direct investment as the sector becomes increasingly sophisticated. Outside of third party investments, transactions have continued to occur at increasing realisations and compressed yields.”

“A falling A$ dollar is reducing margin pressure on producers reliant on export markets, and a raft of free trade agreements is reducing price premiums of Australian products on foreign shelves.”

The spotlight this year was on beef, cotton and water sectors, Mr McIntyre said.

Large private investors step-up in beef

Last year was a turning point for the Australian beef industry, the Colliers report said.

Record prices were achieved for producers in southern markets in conjunction with unprecedented demand from existing and emerging export markets that are currently supplied by northern Australia.

“We are seeing an increase in exports like never before influenced by the global demand, weakening Australian dollar, shortage of breeding stock and recent rains in previously drought affected areas,” the report said.

Water market builds momentum

Mr McIntyre said the Australian water market was now on the global stage, with the Murray-Darling Basin being one of the most established water markets in the world.

“Throughout 2015, investors increased holdings in the water sector due to increased demand in a period of drier conditions. This has pushed the weighted average price by $1000/ML in the second half of last year,” he said.

Global water use is projected to grow twice as fast as oil consumption by 2030.

“We are expecting that water entitlement values will remain high for the next 12 months underpinned by increased demand for water from recently established permanent tree crops as they expand and mature,” Mr McIntyre said.

“Further upwards pressure will come from continued low inflows that are expected as El Nino conditions persist until the second half of 2016.”

The outlook for both Australian and New Zealand agricultural produce was positive, Colliers’ report suggested.

“Global markets have increased respect for our food standards and are willing to pay premiums for quality.”

“Bullish expectations of agriculture are forecast to maintain, as our primary producers relentlessly search for increased margins. As a result, we expect rates across all catergories to steadily grow throughout 2016,” Mr McIntyre said.

Source: Colliers International