Mustering at S. Kidman & Co’s Macumba Station, Oodnadatta, South Australia.
ONE of the world’s oldest investments is shaping up as one of the hottest places for people to put their money this year.
Agriculture is attracting global and local investor interest as the traditional popular picks of banks, retailers and resource stocks disappoint with low or negative returns.
However, investment experts warn that investing in agriculture often means people are putting themselves in the same shoes as farmers when it comes to the risks of weather and other factors they cannot control.
One Investment Group executive director Justin Epstein said agriculture was expected to be a core focus for investors in 2016.
“We are seeing a lot of global investors coming into the Australian marketplace and quite a lot of appetite developing for agricultural,” he said. Deals worth hundreds of millions of dollars were being discussed as overseas players sought quality assets, he said.
OPPORTUNITIES
“There’s an increased view of scarcity of premium agricultural products and people see that longer-term returns on agriculture are very attractive. There might be fluctuations based on weather and other external factors, but when you look at yield and capital growth there’s opportunities there.”
What we’re known for ... Experts say Australia is renowned for delivering quality agricultural products. Picture: Zoe PhillipsSource:News Corp Australia
Mr Epstein said low interest rates around the world were tempting people to look outside their comfort zones for investment opportunities, although the main focus on agriculture was coming from large wholesale investors.
“The volatility in the yield is probably something retail investors don’t have such an appetite for … but I think it’s a matter of time before it opens up.”
The National Farmers Federation has said agriculture in Australia is on the cusp of a boom cycle but it needs capital investment.
Centra Wealth managing director Zac Zacharia said he was positive about agriculture and Australia was in a good position to provide for the world.
“Aside from the fact that people need food — and Australia in particular is renowned for delivering quality product — there is the added benefit of the free trade agreements that we now have with trading partners like China,” he said.
Mr Zacharia said Centra Wealth preferred well-run listed companies such as Elders, Australian Agricultural Company, Bega Cheese, Graincorp, Select Harvests and Beston Global Food Company.
BUYING BACK THE FARM
Another potential agriculture investment this year has stemmed from the Federal Government’s recent rejection of the sale of the Kidman cattle station landholdings — measuring about 80 per cent the size of England — to foreign buyers.
Mr Zacharia said this had opened the door to a crowd-funding proposal for Australians to pool their money to bid for the Kidman land through investment platform domacom.com.au, which is currently aiming to raise $300 million.
CMC Markets chief market analyst Ric Spooner said the rapid growth of the middle class in China and the rest of Asia was a big positive for demand for agricultural products.
“With many agricultural shares you put yourself in the same shoes as the farmer, and you are very subject to the weather,” he said.
Society changes ... A rising global middle class is increasing demand for agriculture products.Source:Supplied
Mr Spooner said some agriculture company shares had a history of disappointing, often because the factors that pushed up the prices of their products — such as drought — were also affecting the companies’ production.
“You have to have a very long term view of it,” he said.
Mr Spooner said companies to watch included beef producer Australian Agricultural Company, 2015 ASX debutant Costa Group and sandalwood supplier TFS Corp.
“There’s a positive outlook for demand from those parts of the sector exposed to the rising middle class,” he said.
Financial strategist Theo Marinis said there were always unknown factors affecting agricultural investments, such as drought and floods.
“Trying to pick markets is impossible, and agriculture is more impossible,” he said.
“I don’t recommend people go all in on a particular sector because the expert analysis says it’s going to do well. Especially with agriculture, non-economic events like climate effects can blow it out of the water.”
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