Super funds to help ag reach $100b target

According to the Association of Superannuation Funds, as at December 31, there was a total of $2.7 trillion in all superannuation funds in Australia, with $1.9t being in regulated funds. We are talking huge numbers.

The National Farmers' Federation aspires for Australian farmgate output to go from the present $60 billion to $100b by 2030.

There are a few constraints on agriculture at the moment, and lack of capital has been identified as one of these constraints.

There have been a few reports written on why superannuation funds have been reluctant to invest in agriculture. It seems to be the last big asset class that superannuation has not invested in.

This seems strange, as some large Canandian and United States pension funds have been active investors in Australian agriculture for many years. Macquarie has been an investor in agriculture, mainly through the entity Paraway Pastoral, which seems to be well run and profitable for the investors.

Superannuation funds have had a few unsuccessful forays into agricultural investments in the past. These have failed mainly because of poor advice and lack of knowledge of the projects.

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The other issue the funds have had in the past is the issue of scale. It is much easier to buy a $200-million office tower than it is to buy and manage an aggregation of farming land of the same value. The rent from the office tower is contracted and known, the returns from agriculture are more variable.

Getting reliable information on agricultural investments is also harder to obtain. Organisations such as the Australian Bureau of Statistics and ABARES collect data, but it is macro in nature and a net return is difficult to calculate. There is benchmarking data available, but it is usually done by private providers.

There are opportunities here for superannuation funds, but they have to be comfortable with the sector.

Superannuation, like agriculture, is a long-term investment. There are returns to be had from both net profit and capital gains.

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Superannuation funds can purchase outright aggregations of farms, and manage them for the benefit of their members. For this model to work, there needs to be more agribusiness expertise within the investment committee of the superannuation funds.

Another model is the debt-equity model, where a fund partners with an existing operator. This model may help bring young farmers into the industry.

It does seem a shame not to access this enormous pile of capital to help agriculture propel itself to its $100b target.