October 17, 2014

Large institutional investors reluctant to invest in agriculture could find safer and more diverse exposure to agriculture through investing in water in Australia.  For a given amount of money a superannuation fund in Australia could invest in a single or a couple of commodities across a small number of farms or for the same investment could invest in over 350 irrigation areas across a diverse range of agriculture production in far-reaching regions of the country.  . Currently Australian almond growers are getting $1,500 per megaliter of water while rice producers are getting between $120 and $150 per megaliter and cotton producers are getting $300 – $500 per megaliter.  The multi-year drought in California which produces 80% of the world’s almonds has opened up the market allowing for expansion in the Australian almond industry, and high demand from Asia is driving growth in the Australian walnut industry – and water is in high demand to produce these high-value crops according to Blue Sky Partners managing director Kim Morison.  Blue Sky Partners has been working to secure long-term, passive institutional capital to invest into agriculture through a portfolio of water rights that is leased or bought by farmers as an input for their business. But despite pledging a 10% return per year over seven years Blue Sky has raised less than its target of $100 million over the past two years for water trading.

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