It’s just like planting money
AUSTRALIANS have more than $2 trillion invested in superannuation funds.
Yes, $2 trillion, according to the Association of Superannuation Funds of Australia — that is $2,000,000,000,000.
However, only 0.3 per cent of this huge amount is invested in the agriculture sector, and the maximum exposure of any fund is only around 1 per cent.
You would like to think that with that sort of capital floating around, combined with Australians’ innate sense of loyalty, we would not have any problem finding domestic investors for agricultural enterprises, wouldn’t you? Think again. In the past, local fund managers and other investors have shied away from local agribusiness because they have deemed the sector too risky. They argue the inherent risks in the sector from weather events and fluctuating exchange rates make it a poor bet for investors.
Australians have never been hungry, and we take our food for granted. We expect to have the world’s best quality food available 24/7 at prices often below the realistic cost of production. That’s not a given in today’s tough business climate, and where people in other countries are prepared to pay more for food than we.
That’s another reason the domestic investment pool has been shallow. We have a limited population, there are few incentives for investment in agriculture, and managers of the biggest local pool of money — super funds — have generally been keeping their hands firmly in their pockets.
It is difficult to reconcile this argument with the continued growth in the value of agricultural production and the fact the performance of other sectors of the economy has been inconsistent at best, and downright abysmal in some cases. As well, many funds are overweighted in coal and other mining shares, and some have significant capital investments in infrastructure projects in unstable areas of the world. There’s no way that anyone could argue these things are anything less than risky.
Foreign pension funds have been listening to experts predicting an exciting future for agriculture generally, and for Australian agriculture in particular. And, over recent years, they’ve been spending up big to buy into Australian farms. That’s because other people can see the long-term value of the industry and are lining up to invest. However, this value, and the exceptional opportunities arising from it, has not as yet been reflected in the level of local investment by local super funds. But things are changing. One of Australia’s topperforming industry super funds is looking to spearhead moves by the industry fund sector to plough potentially billions into agribusiness. A company spokesperson said last week that it was looking at investing in assets where it could control the supply chain from paddock to plate.
The fund has also held preliminary talks with other industry funds about pooling resources to back vertically integrated agriculture projects.
The catalyst for the talks was a recent Industry Super Australia paper that found super funds that had no previous experience with agriculture could build up their understanding of the sector by investing in expert institutional players and/or top-tier producers directly.
The report said there were opportunities for super funds to roll out more obvious equity and debt products targeting successful large to mid-tier operators and up-and-coming rural producers. With interest rates low and the share market flat, local super fund managers should be heeding this advice and re-examining agriculture as a neglected sector that could offer brighter returns than elsewhere.
That has to be a good thing, not just for farmers, but for all Australians. The consequences of restricted access to funds will be limited development, fewer jobs and an industry going backwards compared to our main competitors.
There is an increasing awareness that food security is broader than encouraging people to grow their own vegetables, keep chooks, go to farmers’ markets or get involved in “urban foraging”.
The bottom line is that, if you don’t have food, it is not much good formulating policies centred on how people can afford it. If it’s not there, you can’t eat it. Who produces food? Farmers.
As things stand, access to finance will be a limiting factor if our agriculture sector is to continue to grow and generate wealth for the nation. So investing our national super funds in our future economic and social wellbeing makes good sense on any measure. Jan Davis is an agribusiness consultant and former chief executive of the Tasmanian Farmers and Graziers Association.
One of Australia’s top-performing industry super funds is looking to spearhead moves by the industry fund sector to plough potentially billions into agribusiness.