Global investor sees great opportunities in Australian agriculture

Australian cropping land cheaper than Africa


Agribusiness
Duxton Asset Management chairman Ed Peter sees grain, water entitlements, vineyards and horticulture as good buying in Australian agriculture.

Duxton Asset Management chairman Ed Peter sees grain, water entitlements, vineyards and horticulture as good buying in Australian agriculture.

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Australian cropping land is some of the cheapest in the world on a per tonne production basis – even cheaper than Africa – according to SA based, global asset manager Ed Peter.

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Australian cropping land is some of the cheapest in the world on a per tonne production basis – even cheaper than Africa – according to SA based, global asset manager Ed Peter.

The chairman and co-founder of Duxton Asset Management told the Growing SA 2017 conference in Hahndorf last week that they were buying grain properties for on average half the cost of other OECD countries.

“We are the biggest farmers in Africa as far as we know and we (Australia) are cheaper than any place I would go voluntarily in Africa,” he said.

Most of their buying was interstate where land values were about one third of the price of SA on a per tonne capacity.

“We have unbelievably good farmers here in SA , we are very profitable and our land prices haven’t fallen like other states so we are investing most of our money in NSW,” he said.

Duxton Asset Management, which was founded in 2009, manages or advises clients on about $US700m in assets of which $US460m is in agriculture.

This includes 540,000 hectares of farmland globally.

In Australia Mr Peter said it was the nation’s largest dairy producer, 0.5 per cent of grain production and nearly 5pc of wine production.

It also turns off 135,000 to 150,000 beef cattle a year.

Mr Peter said agriculture was the shining light for investment in the next decade.

“Today we have the cheapest money since Jesus Christ walked the planet which has lead to things happening that are scary,”he said.

“Interest rates don’t stay flat for a long time and when they rise what happens?  – bonds dive, stocks and commercial real estate all ago down,” he said.

Mr Peter said primary production, mining, energy and consumer goods had a better chance of going up.

“There is too much disruption in the energy market and I am not convinced of the ability to pass on higher costs in consumer goods so that leaves us with agriculture and mining. 

“If I buy a mine and dig it out of the ground it is gone but if I take care of my farm it goes up in value –   that is why we are putting money to work in ag around the world.”

As well as grain Duxton is also buying water entitlements, vineyards and horticulture.

“Water is easily identifiable as an asset class,” he said.

“Nine or 10 months ago the US separated their water from land. The same meg (megalitre) of water we are buying at $2500 to $3500 (in Australia) they are buying for $15,000 US dollars and still getting an economic yield.”

Despite Mr Peter’s bullish outlook for agriculture he cautioned producers to consider paying down debt or lock in interest rates ahead of rises in the next three to five years

“If you can take land which gives a 10 per cent return and you can buy it for 5pc and lock it in on time do it but my problem is that land will go down in value if interest rates go up too fast,” he said.

“It (Land) will hold value as long as the grain price or whatever you are growing on it goes up faster than your interest rate, but that is your conundrum.”

Lucky Bay project offers a chance to break monopoly

Duxton Capital is one of the backers of the proposed $100m Lucky Bay grain terminal project on the Eyre Peninsula.

Ed Peter said it made business sense and was confident it would drive down prices for grain growers but also acknowledged it was a “partially patriotic” move to invest in a SA project.

“We don’t typically invest beyond the farm gate except in places like Africa where we have to build our own processing, but it was a case of you just can’t make this up,” he said.

“Our view is we have a very dominant player which has mispriced grain handling and there is an opportunity to break that monopoly, especially by using new technology and do it at a substantially lower cost.

“We can open up a transport window on one side and secondly cheaper loading costs on the other.”

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