Growth in the agriculture sector has created unprecedented demand for Australian agricultural assets from both foreign and domestic investors. This high demand has lifted the value of agricultural transactions during 2015 to $16 billion according to the latest capital markets research published May 2 by realtor CBRE.
“A new norm in beef prices has restored confidence to a large part of the sector, with a consequent increase in purchaser enquiry, and the irrigated row cropping and edible nut sectors are also experiencing strong demand, despite recent downward shifts in farm-gate prices,” noted Mr. Thomas.
The report indicated a jump in Chinese investment in Australian ag assets over the course of last year. Although coming in at under 10% and well below investment values from the U.S. and Europe, Chinese investments saw a noticeable increase, totaling nearly $400 million.
“Foreign investors are now competing head to head with resurgent domestic investor demand, despite a favourable [sic] change in the US dollar exchange rate,” CBRE Agribusiness director, Danny Thomas told The Australian.
Indeed, this heightened competition between Australia’s domestic agricultural investors and their foreign counterparts has played out just this week in regard to the pending acquisition of S. Kidman. Even though S. Kidman announced earlier this month that it had agreed to be acquired by a Chinese-led consortium of Chinese and Australian buyers for A$370.7 million (US$287.3 million), the bidding battle for the cattle empire may not be over. Australian investment firm DomaCom contends that there is still a possibility that it will be able to outbid China’s Dakang Australia and its partner, Australian Rural Capital (ARC), through its crowdfunding platform. Since December DomaCom has been promoting its crowdfunding ideology to a wide range of domestic investors including the country’s super funds. In that time, the firm has gathered commitments from 5,000 investors totaling $70 million and is optimistic that the necessary balance of the bid will be provided by institutional investors.
“Foreign investors are particularly focused on large-scale opportunities, with the most “in demand” sectors being beef – both in northern and southern Australia – edible nuts, irrigated row cropping, dryland cropping, and dairy farms,” said Mr. Thomas reports MP Group International.
This trend has been mirrored in the recently approved acquisition of the country’s oldest and largest dairy operation, Van Diemen’s Land (VDL), by China’s Moon Lake Investments for A$280 million, with the report being issued only days after Australia’s Treasurer, Scott Morrison mandating a 90-day hold on the proposed A$370 million acquisition of S. Kidman by Dakang Australia Holding, a subsidiary of Shanghai Pengxin Group and Australian Rural Capital (ARC).
Additionally, the reports states that within the post-farmgate space, organics, nutritionals, and seafood were shown to be the most active sectors, with water entitlements in southern Australia also being the focus of increased investor interest.
This surge in deal activity within the sector is not expected to cool anytime in the near future, but only gain steam as the year progresses.
“In the current climate, farms (for US dollar investors) are looking cheaper, which will inevitably have a positive impact on the level of investment interest,” said Mr. Thomas, according to MP Group International. “The commodity price outlook also remains relatively favourable, [sic] which will further underpin demand in the sector.”