Australia, known for its vast and fertile lands, has a strong agricultural sector that contributes significantly to its economy. Traditionally, investing in agriculture often involved buying and managing a farm. However, modern times have brought forth alternative avenues for individuals interested in agricultural investments without the need to become hands-on farmers.
In this article, we will explore the feasibility of investing in Australia’s agriculture sector without owning a farm, focusing on agricultural property funds and the crops prospective investors can consider.
Investing in Agriculture
Investing in agriculture has traditionally been a hands-on endeavour, involving the purchase and management of farmland. While this approach can be lucrative, it also requires substantial knowledge, time, and capital. Fortunately, advancements in financial markets and investment strategies have opened up new opportunities for those who want to be a part of the agricultural industry without being farmers themselves.
Investing in agriculture can provide financial security in several ways:
- Steady Returns: Agricultural investments often yield stable, long-term returns, making them an attractive option for those looking for consistent income.
- Diversification: Agricultural assets can be a valuable addition to an investment portfolio, providing diversification beyond traditional stocks and bonds.
- Inflation Hedge: Agricultural assets tend to appreciate in value over time, serving as an effective hedge against inflation.
- Tax Benefits: In Australia, there are tax benefits available to investors in agricultural assets, such as deductions for capital expenditure. The ATO has a list of potential benefits, but consult your tax agent to see if some of those deductions apply to you.
Investing in Australian agriculture goes beyond financial returns; it also plays a vital role in ensuring food security, with demand increasing alongside the global population size. Australia, with its abundant agricultural resources, can play a crucial role in meeting this demand.
Investors who choose to invest in agriculture, whether through property funds or crop production, contribute to the stability and sustainability of the country’s food supply. Moreover, they align their investments with the broader goals of ensuring food security not only for Australia but also for the global community.
Agricultural Property Funds
One of the most accessible ways to invest in Australian agriculture without owning a farm is through agricultural property funds. These funds pool together capital from multiple investors to acquire and manage agricultural properties. The following are some key points to consider.
Diversification
Agricultural property funds typically invest in a variety of agricultural assets, including farmland, orchards, vineyards, and more. This diversification helps spread risk, making it a safer investment option.
Professional Management
These funds are managed by experts in the agricultural industry who have the knowledge and experience to make informed decisions about crop selection, land management, and other critical aspects.
Passive Income
Investors in agricultural property funds can earn passive income through the rental or sale of agricultural assets. This income stream can provide a steady return on investment.
Limited Exposure to Farming Risks
Unlike owning a farm, where the owner is directly responsible for all aspects of farming, investors in agricultural property funds have limited exposure to operational and market risks.
Liquidity
Agricultural property funds offer a level of liquidity that owning farmland does not. Investors can typically buy and sell their shares in the fund, providing flexibility.
Which Crops to Consider for Investment
If you’re interested in investing in crops directly, several options are well-suited to the Australian climate and market conditions. These are some of the crops prospective investors can consider, including updates to the associated industry in Australia:
Wheat
Wheat is a staple crop in Australia, currently one of the world’s largest wheat exporters. Investing in wheat production can be profitable due to strong global demand, but after some challenges Down Under.
The Australian Bureau of Agricultural and Resource Economics and Sciences reported in late 2023 that after three years of record output, wheat production for summer 2023-2024 is projected to go down 27 per cent to 3.8m tonnes and the winter crop is estimated at 46m tonnes – a 33 per cent drop. WA, in particular, estimates its output to be down six per cent but a considerable bulk of it is of premium quality, not to mention it is well-known for shipping big stocks to noodle producers in Indonesia.
Barley
Barley is another major Australian crop, used in various industries, including brewing and animal feed. At around 9m metric tonnes produced every year as estimated by Grains Australia, It’s a resilient and versatile crop that can be a good investment. On the Australian front, local growers may be in for some resurgence after China ended three years of tariffs in August 2023, allowing barley growers to start selling to the mainland.
Wine Grapes
Australia is renowned for its wine production. Investing in wine grape vineyards can be profitable, especially in regions like the Barossa Valley or Margaret River. However, a drop in experts now leave Aussie wine growers with excess supply and few markets to penetrate, with South Korea as a prospect. The federal government is also seeking to lower the industry’s carbon emissions output, with Wine Australia building an Emissions Reduction Roadmap to reduce it by as much as 40 per cent by 2030.
Citrus Fruits
Oranges, lemons, and other citrus fruits are in high demand both domestically and internationally. Investing in citrus orchards can provide a consistent income stream.
Australia’s citrus industry had some ups and downs though in 2023. In September 2023, some growers in Murrumbidgee, NSW, lamented they are having problems making output for short-term Valencia orange contracts due to high manufacturing costs, which Citrus Australia attributed to supply chain issues due to the pandemic and the Russia-Ukraine war. The Department of Agriculture, Fisheries and Forestry (DAFF) also recently entertained applications for a new alternative-assurance model for citrus packhouses and growers.
Almonds
Almond farming has gained popularity in Australia due to growing global demand for this nutritious nut. It’s a high-value crop with the potential for good returns.
The local almond industry had a problematic year in 2023 with low output, but is estimated to bounce back this year with a projected 28 per cent higher yield to 140,000 metric tonnes. The Almond Board of Australia also put in $6.2m for the Almond Centre of Excellence, with the goal to devise new methods to bring production practices for Australian growers to international standards.
Avocados
Avocados are another crop with increasing popularity and strong demand, especially in health food options. They thrive in certain Australian regions and can be a profitable investment.
For the local avocado sector, Avocados Australia CEO John Tyas said the current weather conditions in Australia have been a boon to growers amid strong demand, with output returning to 2020-2021 levels – and some fruit sellers are offering a kilo of avocado for just $0.99. Singapore, Malaysia, and Hong Kong are the primary markets for Australian avocados, and growers of Hass avocados in WA recently shipped to Thailand for the first time in ten years after clearance from the Thai Department of Agriculture. Efforts are also underway to possibly ship avo to India and China.
Conclusion
Investing in Australia’s agriculture sector without owning a farm is not only feasible but also a prudent financial choice. Agricultural property funds offer a straightforward way to participate in this vital industry while minimising the challenges associated with direct farm ownership. Additionally, choosing the right crops for investment can lead to profitable returns.
As the world grapples with increasing food demands and environmental concerns, agriculture remains a critical sector. By investing in agriculture, you not only secure your financial future but also contribute to the broader goal of ensuring food security and sustainable farming practices in Australia and beyond.
DISCLAIMER: This article is for informational purposes only. 2 Ezi has no relationships with any Australian farm property portal, or agriculture industry stakeholder, or fruit business. Please discuss your options with a financial advisor or an agricultural consultancy.
