Download Present - Nuffield International

Attracting Capital to Agriculture
CHALLENGES &
OPPORTUNITIES!
Agenda
 Agriculture’s historical performance
 The coming Global Food Crisis
 Present issues with global capital markets
 Attracting capital – why, who and how
 Challenges of attracting capital
 Possible solutions
Agriculture’s Historical Performance
30 Years
15 years
10 Years
5 Years
Aust
Property
11.8%
8.1%
6.3%
-2.9%
Aust Shares
12.6%
10.5%
8.4%
6.8%
Aust Bonds
10.5%
7.4%
6.4%
6.0%
Intl Shares
12.4%
5.1%
-3.3%
-0.9%
Cash
9.4%
5.7%
5.6%
5.8%
Ag Top 25%
10.7%
10.7%
11.8%
8.0%
Agriculture
Performance
Ranked
4/6
1/6
1/6
1/6

Source ABARE & Cornish Consultancy
Risk/Return per Asset Class 1980-2010

Source: Cornish Consultancy
Agriculture’s Historical Performance
 Ag has been a good investment, particularly over
past 10 years
 Less volatility than other investments?
 Increased commodity prices?
 Expectations for the future – the “new normal”
(PIMCO)
Price Predictions– Where Will We Go?
DJII – Is the Equity Bullmarket Over?
Global Food Crisis
Global Food Crisis
 Emerging demand in China, India and SE Asia
 Constraints on water, land, fertiliser and supply
shocks
 Biofuels and agriculture’s increasing correlation with
energy prices
 Rapid $US depreciation
 Investment funds and behavioural impacts
Global Capital Markets
 Sovereign Debt Issues (Europe and USA)
 Currency debasement
 Volatile stock markets
 Bull market in US Treasury’s
 Where do you invest money?
 Looking for emerging markets and alternative asset
classes?
Attracting Capital
 Why do you want to do it? What is your exit
strategy?
 Who are you going to ask to invest?
 How are you going to do it?
Types of Capital
 Bank debt
 Shared Crop Equity (AACL)
 Individual Investors
 Private Equity
 Superannuation Funds
 Sovereign Wealth Funds
 Initial Public Offering (IPO) on the sharemarket
Challenges of Attracting Equity Capital
 Size of investment & relevance
 Exit strategy
 Volatility of earnings
 Strength of cashflow
 Which industries
 Geographic diversity
Challenges of Attracting Equity Capital
 Management capability and accountability
 Corporate governance and reporting
 Structure – separate land from operations
 Lack of understanding of agricultural investment
 Lack of investment grade product and track record
 RISK!!
Performance of Corporate Agriculture
 Australian performance has largely been poor
 Good at raising capital, not so good at managing




farms
Listed companies rarely trade above NTA
Family farms have more competitive cost base
Human resource issues
Do they just want to own land and lease it out?
Solutions
 Need to overcome challenges mentioned previously
 Structured products that are easily bought/sold
 Pooled investments between family farmers
 Finding HNW individuals to invest with
 Offtake agreements with SWF
Solutions
 Funds interested in green energy or biodiversity?
 People that can manage large businesses
 Education about agriculture for the investment
community
 Need to combine best aspects of family farms with
corporate money.
Deja Vu all over again?
Thankyou