Who Owns Australia: why institutional investors are flocking to Aussie ag

High net-worth individuals and cashed-up pension and sovereign wealth funds have seized the initiative in the nation’s rural property market in the past year. Find out why.

Institutional demand for Australian farming assets has increased in recent years.

High net-worth individuals and cashed-up pension and sovereign wealth funds have seized the initiative in the nation’s rural property market in the past year, with some renowned names growing their Australian agriculture portfolios to eye-watering sizes.

AgJournal’s annual investigation into Who Owns Australia’s Farms – now in its eighth year – shows some major global players secured revered Australian properties in the past 12 months, while others decided to consolidate their ventures rather than expand, in the face of more trying seasonal and economic conditions.

Following several years of rapid growth in the value of Australian farmland, prices stagnated, and declined in some parts, as rising interest rates, record input costs, weakened commodity prices and a less-favourable seasonal outlook quelled the ability of local farming families to purchase additional farmland.

For example, even Australia’s biggest landholders, central Australian mates and pastoralists Viv Oldfield and Donny Costello, held the size of their Crown Point Pastoral Company steady at a whopping 9.2 million hectares, retaining the title for the third year in a row.

On the other hand, institutional investment goliaths Canada’s PSP Investments, the local and overseas-backed Macquarie Agriculture funds and the New York-based TIAA-CREF, via Nuveen Natural Capital, grew the value of their formidable portfolios by billions of dollars in the past year, to a whopping $14 billion combined.

LAWD senior director Danny Thomas says that in the past year institutional buyers of Australian agricultural land outpaced the local competition unable to compete at the frantic pace of the post-2020 rural property boom.

“The market flipped in the last 12 months, institutions caught up a bit and started to win the race as they weren’t pushed as hard by family farming interests,” Thomas says.

“There was also a two-paced market, where for assets above that $40 million to $50 million there was firm demand.

“There was a wave of US money, because in dollar terms, our farmland looks cheap, so they are active in the market and those higher-quality assets meet their demand.”

The pension fund for the Canadian public service, including its world-famous mounted police force, PSP Investments, remains the largest owner of Australian agricultural assets by value, growing its portfolio significantly in the past 12 months to now measure $7.5 billion.

Most notably, it recently paid $180 million to acquire a 60 per cent share of Ellerslie Free Range Farms in Queensland. Last month its Altora Ag cropping business paid $70 million for Duxton Farms’ 8000-hectare Timberscombe Aggregation near Forbes in central NSW.

PSP Investments-backed Altora Ag recently paid $70 million for Duxton Farms’ 8000-hectare Timberscombe Aggregation near Forbes in NSW.

The nation’s second-biggest investor, Macquarie Agriculture, has also lifted the value of its portfolio to about $4 billion, buoyed by an Australian footprint of about 4.5 million hectares, despite selling two of its NSW stations in recent months.

TIAA-CREF, the New York-based teacher superannuation giant, has expanded its portfolio to $2.5 billion in value, following the recent acquisition of the $90 million Sunshine Farms aggregation near Forbes NSW.

Fiera Comox Partners, another Canadian agricultural fund, was among those to join the $1 billion-plus club in the past year, significantly ­expanding its portfolio via its Excel Farms venture, following a move into NSW in November last year purchasing the 26,839-hectare Ballandry Station near Griffith for $120 million, and multiple purchases in southern parts of Western Australia.

JLL Agribusiness director Bhavin Patel says institutional demand for scale and stability in assets is attracting them to Australian agriculture.

“As high-net-worth individuals, investment funds, pension funds and sovereign-wealth funds look towards stable, inflation-resistant investments, agriculture is emerging as a favoured option,” Patel says.

“The Australian agriculture sector holds significant value, standing at roughly $3.6 trillion, making it the second-largestreal estate sector in the country.

“The sector’s growth potential, driven by global population trends, technological advancements and increasing capital inflows, positions it favourably for long-term investment strategies.”

There has also been movement on the list of Australia’s biggest landholders by hectares with a carve-up of the MacLachlan family’s Jumbuck Pastoral empire and a significant acquisition by Canada’s Alberta Management Investment Corporation affecting rankings.

The biggest landholders behind Crown Point Pastoral are the ASX-listed Australian Agricultural Company – which this year marks 200 years of existence – with 6.62 million hectares, the Queensland Investment Corporation-backed North Australian Pastoral Company, with more than six million hectares, Williams Cattle Company (4.65 million hectares), Macquarie Agriculture (4.5million hectares) and Peter and Jane Hughes’ Hughes Pastoral with a footprint of 3.9 million hectares.

LAWD senior director Danny Thomas.

Rural Bank senior insights manager Greg Kuchel says farmland values reached an “inflection point” last year as tighter margins affected the ability of Australian farming families to expand. “Farm values remain strong, however the decrease in farm marginshas tempered the desire of some farmers to purchase at current land prices,” Kuchel says.

“If we look at Victoria, the number of land transactions for the first half of 2023 was 408, down 39 per cent from the second half of 2022 and 51 per cent lower than a year earlier.

“This is the lowest number of transactions for a first half-year period on record.

“For livestock producers who have seen a significant decline in commodity prices, their margins have reduced andhence their ability to service additional debt. For grain growers, the margins have remained healthy, given good commodity prices and above-average yields. This continued level of profitability is supporting stronger growth in demand for cropping land.”

Despite tighter margins, Thomas says he expects improved sentiment in the rural property market as this year goes on.

“Since the last half of last year we have seen some well-­established families, in beef and cotton especially, undertaking significanttransactions and getting sorted for the next 30 years to grow their businesses,” he says.

“I think if we see the Reserve Bank signal or physically drop interest rates, and if we head into a La Nina year, confidence will be at a relatively much higher ebb by spring.”