Why invest in Australian agriculture?

Today Australia is an important part of the global agricultural production and agribusiness market.

With the world’s fastest growing population on our doorstep – Asia, and the rest of the world, will need more quality food to eat. Australia is recognized for its clean, green image and high quality, low cost agricultural products, which are supported by our recognized trade relations as preferred trading partners with many of these countries.

The anticipated food demand for 2050 creates great opportunities for Australian agriculture. Australia is in a strong position to meet this higher demand. Australia has a comparative advantage in the production of agricultural products and its geographical location means lower transport costs in exporting to Asia and China.

With Australia’s position as an important exporter of many agricultural commodities, the projected increase in global agrifood demand and imports should lead to higher Australian export levels. According to the Australian Bureau of Agricultural and Resource Economics (ABARE), the demand for soft commodities will continue to rise over the medium term, which will see Australian agriculture continue to flourish.

Australian agriculture is cost effective and has prospered on a very low subsidy base. Australia is considered one of the world’s low cost, most efficient producers of quality agricultural commodities, whose competitiveness has been further enhanced by the depreciation of the Australian dollar.

When evaluating the profitability of investment in Australian agriculture, it is appropriate to draw comparisons with returns in other sectors of the Australian and global economies.

The overall investment returns from quality agricultural property in Australia have been more than comparable to those available from other major investment sectors including commercial, residential and industrial property. Importantly too, the sector has demonstrated a lower level of volatility.

Whilst the property and financial sectors may have performed better than the agricultural sector at times, in recent times, with increasing commodity prices, lower interest rates, a lower exchange rate and a recognition by asset allocators of agriculture as an asset investment class for institutional investors, the agricultural sector is now placed in a very competitive position, and in most instances is performing better than its competitors. Continuing strong commodity prices, as reflected in the attached Industry Overview, and excellent cost efficiency should see the agricultural sector continue this trend in to the near future, given normal seasons.

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