April 25, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

The Public Sector Pension Investment Board (PSP Investments) has moved to consolidate two of its majority-owned Australian broadacre cropping businesses, bringing together BFB and Daybreak Cropping to create one of the leading cereal growing operations in the country. 

With 41 farms across 10 aggregations spanning four states, the resulting business will run under the leadership of the current BFB senior management team.

PSP Investments, one of the largest pension investment managers in Canada with C$204.5 billion (US$160.2 billion) in net AUM (as of March 31, 2021), stated that the decision to merge the businesses was made in line with its long-term investment horizon, and that the resulting combination is expected to play a role in driving operational efficiencies and to accelerate growth through continuous improvements to on-farm production practices with an overriding focus on sustainability.

“This important development is a natural evolution of our portfolio of broadacre farming assets,” said Marc Drouin, senior managing director, real assets and global head of natural resources investments, PSP Investments.

“The combination of the businesses will allow us to simplify operating structures and capture the benefits from operational scale while driving growth, performance and results.”

BFB, a diverse farming business based in New South Wales, Australia, was originally acquired by PSP Investments from Proterra in late 2018 for $200 million. In the 1980s the business began as a trucking company, but soon expanded into cropping and grain storage. Today is a vertically integrated business incorporating farming, input (fertilizer and chemical) sales, bulk storage, piggery and logistics divisions, fuel, and agronomy. 

Daybreak Cropping is a joint venture investment fund established between PSP Investments and Warakirri Asset Management in 2016. 

Under the management of Warakirri, Daybreak acquired Erregulla Plains, an iconic farming property in Western Australia for A$97 million (US$65 million) in February 2020. Most recently, only weeks ago in mid-March, Daybreak went on to acquire Yarrabee Park, a grain aggregation in New South Wales, from goFARM in a deal reported to exceed A$60 million. This deal marked the eighth acquisition for Daybreak Cropping, which expanded its overall portfolio to more than 85,000 hectares (210,040 acres) across eight aggregations in New South Wales, Queensland, Western Australia, and Victoria.

Over the coming months Warakirri will shift to exit out of its position as a minority shareholder in Daybreak, stating that it will work closely with BFB on a smooth period of transition that is not expected to affect farm-level employees.

Jim McKay, managing director at Warakirri Asset Management, commented, “We’re extremely proud of our role in contributing to the establishment of a significant national portfolio of investment-grade broadacre cropping assets with a culture that prioritizes the safety and wellbeing of the people, while executing at scale sustainably and in line with global best practices.”

However, Warakirri stated that it intends to continue its partnership with PSP on Aurora Dairies, a dairy business majority owned by PSP Investments that comprises 39 dairy farms and dry cow blocks in South Australia and across the state of Victoria.

“We will work closely with PSP Investments and BFB to ensure a smooth transition of operations and we’re confident that our talented teams will continue to deliver great outcomes,” said McKay. “We would like to thank PSP Investments for a very successful Daybreak Cropping partnership, and we look forward to continuing our longstanding partnership with them on Aurora Dairies.”

Indeed, earlier this month Warakirri signaled a shift when it announced two foundational investments for its Warakirri Farmland Fund, which the manager launched in April 2021, that align with a stone fruit category strategy with fresh fruit market leader and fund tenant partner,  W.F. Montague Pty Limited.

Much like its diversified agricultural fund, which began fundraising at the start of 2019, Warakirri plans for this farmland fund, which is targeting A$500M (US$386.6 million), to acquire, develop, and own a diversified portfolio of investment grade agricultural assets that will be leased to high-quality agricultural businesses as tenant partners.

Targeted assets will include horticulture (nuts and fruits), viticulture (wine and table grapes), water entitlements, and select row crop farmland assets. The fund also will employ Warakirri’s Sustainable Best Practices framework toward reducing energy use and carbon emissions, and improving water efficiency and biodiversity through the management and operation of these assets – the same level of management that Warakirri brought to Daybreak.

“We would like to thank our operating partner, Warakirri Asset Management,” said Drouin, “for helping Daybreak Cropping to become a world-class sustainable farming operation.”

~ Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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