Private investment syndicates eye broiler farms, but wine the best opportunity
With a positive outlook being seen in Australia’s agricultural commodities market, private investment syndicates are turning towards owning and developing broiler farms, according to Colliers International research.
The latest Rural and Agribusiness Research and Forecast Report 2014 from Colliers International has seen the best performing agribusiness sector in Australia being poultry, and indicates that the bottom of the market may have passed.
In fact, increased food demand and improved availability of finance, along with an improving global economy, could be behind the change, explained Tim Altschwager, national director of rural and agribusiness for Colliers.
“The poultry sector is arguably the best financially performing agribusiness enterprise in Australia, currently based on the projections which show that chicken meat is to remain Australia's most consumed meat in the medium term,” Altschwager said.
“This demand is creating passive investment opportunities for acquisition of assets on sale and leaseback models for long terms of 10 to 20 years with double digit yields,” he said.
“Syndicates of private investors are developing and owning the new-age broiler farms producing millions of chickens per annum. Sophisticated investors have the opportunity to take a larger share of the market, with 70 per cent currently owned by two processing companies Ingham and Baiada.”
The cotton industry is also of note, with property transactions high in the Murrumbidgee Irrigation Area.
“This region is experiencing demand for properties due to a lower capital cost of land when compared to cotton farms in northern regions, typically higher water security and similar yields. The MIA is also experiencing significant growth in ginning demand,” he said.
“China is stock piling cotton for future production, increasing the demand for cotton textiles which in turn makes them the largest importer of Australian cotton, accounting for 68% of our total production.”
Rural beef properties, however, has been tracking below average for the last five years due to drought, said director of research Mark Courtney.
“Although excess supply has been compounded by poor seasonal conditions leading to below pre-GFC levels and a number of distressed assets on the market, it is important to note that gains have been made in the first half of 2014,” he said.
“Furthermore, as most of the receiver stock is selling, the increase in transactional activity and competition in the market is leading to a slight rise in confidence.”
The wine industry’s assets are also still near the bottom of the cycle, however Courtney noted that this may provide an opportunity for cash-rich counter cyclical investors due to low entry costs.
“At current asset values Australia's wine industry sector represents the greatest potential for capital growth over the longer term,” he said.
“The most sought after assets are vertically integrated business in strategic locations, such as the Barossa Valley.”
In fact, Property Observer has only recently reported that a Chinese-owned, South Australian-based company has paid about $15.5 million for the Yaldara Winery, one of the most picturesque and attractive wine tourist destinations in South Australia.