Work needed before super funds can increase agriculture investment

While superannuation funds see opportunity in Australian agriculture, work is required before they can increase their investments.

Industry Super Australia (ISA) says, with the right expertise and policies, that industry super funds could be “enticed to substantially increase” their investment in Australian agriculture, which currently sits at $1.6 billion.

ISA chief economist Dr Stephen Anthony said, with the release of the discussion paper Driving Super Fund Investment in Agriculture, that there were real opportunities in agriculture, but groundwork was required 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 Mr 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,” he said.

“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.”

ISA said the discussion paper was a response to calls for super funds to invest in Australian farming, and thereby support regional development.

“Federal politicians have regularly called for superannuation funds to invest more in Australian agriculture. Those calls are often accompanied by a lament that foreign interests, including state owned investors, are buying up significant farm land and other strategic assets,” says ISA, in the discussion paper.

The report asks why the “prospect of high theoretical returns” has not led to increased investment in agriculture by superannuation funds. A number of issues are raised as potential answers: tougher and less predictable farming conditions compared to other countries, fragmented farm industry structures, an inability to readily identify top producers, a tendency by institutional investors to take a ‘hands-on’ approach and an agricultural policy that has “handed the relatively small local food and grocery markets to monopolists and foreign investors”.

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