Why Macquarie is looking to pump billions into farms

Post by 
Chris Simpson
Published 
February 29, 2020
D


espite recent drought and bushfire conditions, domestic and overseas demand for Australian farmland is strong

In an article recently published in The Sydney Morning Herald, Business Reporter Clancy Yeates talks with Macquarie Bank’s Head of Infrastructure and Real Assets Elizabeth O’Leary on why they are directing significant focus toward investments into Australian farmland and operations.

With a portfolio including avocados, various other crops, cattle and a 49 per cent stake in the country’s largest cotton farm, Cubbie Station, Macquarie’s pitch is that global capital can provide the scale required to finance the farming practices required to feed a growing world. They are also in a position to support more sustainable farming practices with capital funding.

O’Leary says, despite the extreme conditions, there remains strong demand from big investors, especially from overseas, to own Australian farms. Some of its investors have pledged to lock up their capital for 15 years and O’Leary stresses that over longer time frames, farmland is a “highly defensive” asset.

“If you look at all the data, returns in agriculture are uncorrelated with anything, so it’s just a classic diversification story,” she says.

Cultivate Agri Partnerships bases its investment strategies off similar data and also shares O’Learly’s view that there are significant upsides in the longterm thematic of Australian farmland and cattle investments. Unlike Macquarie Bank, we operate a little differently offering the agile and dynamic traits of a boutqiue asset manager working with patient investors and family corporates.

Owing to factors like drought and bushfires, we know farming can be volatile

For Cultivate, it is how we manage risk and prepare for the volitility when it arises.  We do this through maximising land value by implementing water, soil health and pasture initiatives to ensure feed and effective land management during the drier spells.

We focus on cattle breeds that are built to thrive in harsh tropical terrain. These breeds offer indurance in harsh climates as well as fertility performance. When we invest in land, feed and water infrastructure for a cow, it is important to have highly fertile breeds to ensure optimal portfolio growth with less environmental impact.

O’Leary acknowleges that it has been a “really tough year across the board” due to lack of rain. However financial logic is also underpinned by the growing global population and food demand. She also remarks that on a global stage where funds look at opportunities and risk-weighted returns, Australia fares very well.

To read the full article published in The Sydney Morning Herald, click here.


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