Tue, Oct 6 2015
Farmland a good buy.I
INVESTING in agricultural property generates long-term returns very similar to those from commercial property - and is a good diversification strategy, a new global survey has found.
Over a 23-year period to 2013, investment in a globally diverse portfolio of agricultural property would have generated a total average annual return of 11.1 per cent, the survey by Melbourne firm Atchison Consultants found.
Earnings from operations on agricultural land accounted for 6.4 per cent of the return with capital growth accounting for 4.7 per cent, the survey found.
The survey, carried out for a large agricultural investment manager, found that returns from agricultural property have a low correlation with returns from shares, listed property, fixed interest and cash.
The biggest impacts on returns are variability of rainfall and commodity prices, but over the longer term, these are smoothed out.
The results were based on analysis of property performance across 10 countries, including Australia, which represented 23 per cent of global agricultural production.
"We found that agricultural property has quite similar characteristics to commercial property," said Atchison Consultants managing director Ken Atchison.
"Based on our analysis, agriculture is a positive investment proposition."
The results provide the base investment case for why sovereign wealth funds are investing so heavily in agriculture, apart from the need to secure food supply.
They may also give Australian superannuation funds, which have virtually ignored the agricultural property sector, pause to consider upping their exposure.
© AFR
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