With the right expertise and policy settings, industry superannuation funds could be enticed to substantially increase their $1.6 billion stake in Australian agriculture, a new report suggests.
The Industry Super Australia (ISA) discussion paper, launched today, responds to calls for the $2 trillion superannuation sector to invest in local agriculture and, in so doing, support regional development.
The report’s author, ISA chief economist Dr Stephen Anthony, said there were real opportunities to be had in Australian farming but the groundwork would have to be laid first.
“Institutional players have not always fared well in Australian agriculture. Past failures, poorly executed or short sighted, usually revealed on closer examination mitigating factors, if not a silver lining,” said Anthony.
“With scale and the right settings, the fundamentals of relatively stable returns, capital appreciation from rising land values and renewable income cash flows are very attractive”.
“Into the future, the potential Australia has to position itself as the food bowl for Asia’s burgeoning middle class is really quite staggering”.
“Australian superannuation funds could help take agriculture to the next level in global competitiveness”.
“But to start, the funds will need reliable, independent data; agriculture-specific expertise; and revised national policy settings,” he said.
The paper shows that global investors are rapidly accumulating strategic stakes in local agricultural holdings, with Canadian and American pension funds investing over $1 billion in Australia since 2007.
“That global investors with big reputations think they can make a go of farming in Australia, and are prepared to invest significant amounts for the long haul, is encouraging,” said Anthony.
“Australia is receiving ready-access to foreign capital and expertise; but our agricultural industry is being ‘cherry picked’ with quality assets falling into the hands of external investors,” he said.
The paper identifies opportunities for bush communities and funds. Recommendations include:
- Establishing an independent survey of farm performance to measure rates of return across various crop and livestock producers;
- Undertaking an infrastructure audit of each of the major commodity supply chains to ensure the adequacy and competitive operation of transport, processing and storage facilities across regions;
- Establishing ACCC regulatory arrangements to achieve effective price discovery and transparency in wholesale agricultural markets to neutralise big supermarket and international subsidy impacts;
- Through industry and trade policy encouraging domestic operators to form consortia with local and foreign processors and distribution networks to reduce agricultural sales risk;
- Requiring from the Commonwealth Treasury a more strategic approach to foreign investment rules;
- Establishing a regional development bank to provide advisory services to rural producers and arrange long term finance to more efficiently intensify operations.
Stephen Anthony is available for interview. Media contact: Phil Davey 0414 867 188
Industry Super Australia provides policy, research and advocacy on behalf of 15 not-for-profit Industry SuperFunds who are the custodians of the retirement savings of five million Australians.
Industry Super Australia Pty Ltd ABN 72 158 563 270, Corporate Authorised Representative No. 426006 of Industry Fund Services Ltd ABN 54 007 016 195 AFSL 232514.