challenges & opportunities! attracting capital to agriculture
TRANSCRIPT
CHALLENGES & OPPORTUNITIES!
Attracting Capital to Agriculture
Agenda
Agriculture’s historical performanceThe coming Global Food CrisisPresent issues with global capital marketsAttracting capital – why, who and howChallenges of attracting capitalPossible solutions
Agriculture’s Historical Performance
Source ABARE & Cornish Consultancy
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
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 depreciationInvestment funds and behavioural impacts
Global Capital Markets
Sovereign Debt Issues (Europe and USA)Currency debasementVolatile stock marketsBull market in US Treasury’sWhere 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 debtShared Crop Equity (AACL)Individual InvestorsPrivate EquitySuperannuation FundsSovereign Wealth FundsInitial Public Offering (IPO) on the
sharemarket
Challenges of Attracting Equity Capital
Size of investment & relevanceExit strategyVolatility of earningsStrength of cashflowWhich industriesGeographic diversity
Challenges of Attracting Equity Capital
Management capability and accountabilityCorporate governance and reportingStructure – separate land from operationsLack of understanding of agricultural
investmentLack of investment grade product and track
recordRISK!!
Performance of Corporate Agriculture
Australian performance has largely been poorGood at raising capital, not so good at
managing farmsListed companies rarely trade above NTAFamily farms have more competitive cost
baseHuman resource issuesDo 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 farmersFinding HNW individuals to invest withOfftake agreements with SWF
Solutions
Funds interested in green energy or biodiversity?
People that can manage large businessesEducation about agriculture for the
investment communityNeed to combine best aspects of family farms
with corporate money.
Deja Vu all over again?
Thankyou