Tag Archives: farming
SA’s Farmland ‘Outperforms Stocks, Bonds’
BY SHANNON SHERRY, AUGUST 29 2013 Picture: THINKSTOCK Although seen as a “new asset class”, investing in farmland ” is as old as humankind”, says Duncan Vink, head of asset manager the United Farmers Fund, which partners Futuregrowth. The company has employed the model in three projects since starting the Agri-Fund in December 2010 — a citrus farm in Marble Hall, Limpopo; table grape farms in the Northern Cape; and a deciduous and stone fruit farm in Piketberg, the Western Cape. Futuregrowth Agri-Fund manager Smital Rambhai says its investment in farmland on behalf of clients through its Agri-Fund forms part of its social responsibility suite that seeks to make “sustainable and responsible” investments. The Agri-Fund has a target size of R1bn and aims for returns of 10% plus inflation. The minimum investment is R50m, mainly from pension and provident funds. “We own the land, the farming implements and infrastructure and the trees and plants. The operator owns the produce and has to pay the lease and the costs, including labour,” says Mr Rambhai. Mr Vink says the buy-and-lease model means that the farmer’s biggest capital outlay — land — is circumvented while for investors it is easy to structure, takes less time to monitor and there is no exposure to volatile crop prices. “Food prices are rising and as long as people eat, productive farmland will have value,” Mr Vink says. “Investing in farming has two different possibilities — investing in the property or in the farming. Historically, the property entity has outperformed the farming business,” he says. The social spin-offs of the investments include job creation, provision of basic healthcare and education for workers, improving their housing and personal development, such as identifying employees for management training. GM of Standard Bank primary sector agribusiness MC Loock says from a farmer’s point or view the term of a contract would be most important when considering whether to lease. He believes farmers leasing land under the Futuregrowth model would be free of risk of land claims. “Younger farmers often look to lease land rather than buy, much like a young couple renting a home rather than buying, as a means of leveraging their balance sheets. But as soon as they can they want to get into the property market rather than pay off someone else’s bond.” Continue reading
Scrapping Of Carbon Tax Threatens Carbon Farming
ABC Rural By Caitlyn Gribbin Updated Mon Jul 15, 2013 2:25pm AEST PHOTO: Henbury Station in Central Australia, site of a failed attempt to establish the world’s biggest carbon farm. (ABC: Caddie Brain) AUDIO: Fears over future of carbon farming (ABC Rural) MAP: Sydney 2000 Research and lobby group, the Australian Farm Institute, says carbon farming won’t be profitable for years, if an emissions trading scheme is fast tracked. Prime Minister Kevin Rudd will scrap the carbon tax and move to an emissions trading scheme next year – one year earlier than originally planned. The fixed carbon price of $24.15 a tonne will be removed in favour of a floating price, thought to be between $6 and $10 a tonne. Mick Keogh, from the Australian Farm Institute, says that price is too low for farmers to make profits from the Carbon Farming Initiative, a scheme where farmers earned carbon credits and sell to people and businesses wanting to offset their emissions. “If you’re in the market to sell carbon credits, you’re now looking at the potential next year that those credits will be worth $6 a tonne, rather than the $24.15 a tonne,” he said. “That obviously has a big impact on the potential profitability of a project you might be looking to undertake. “It would be very limited numbers of projects that would likely to be viable.” Farmers say the carbon tax has significantly pushed up their bills, especially electricity. Australian Dairy Farmers president Noel Campbell says a lower carbon price is a win for agriculture. “It’s positive compared to where we have been, certainly it will make a difference,” Mr Campbell said. “But still we will need to make sure that with whatever situation we’ve got, we’re in a competitive situation with the people that we trade against.” Opposition Leader Tony Abbott says the Prime Minister has not truly abolished the carbon tax, but is merely changing its name. The Greens leader Christine Milne says the decision to scrap the carbon tax is “cowardly”. The Australian Industry Group says Mr Rudd’s move is positive and will cut costs for businesses once the floating price begins next July. Continue reading
Farming Investments Continue Their Bull Run
Catherine Paice Saturday 25 May 2013 Rural property delivered another year of strong growth for investors in 2012, narrowly missing out on a second year of double-digit returns, according to Carter Jonas and Smiths Gore, sponsors of the IPD Rural Property Investment Index. Total return was 9.9%, although once again almost all this came from capital growth of 8.2%. Income return was just 1.6%, remaining for the third year running at its lowest point in the index’s 32-year history. Total return beat bonds and both commercial and residential property, only just being overtaken by the rally in equity markets. Transaction activity had a strong effect on performance, driving total annual returns up to more than 12% within the portfolio. There is demand from farmers looking to expand and from individuals looking to protect their wealth as well as investment funds, said Giles Wordsworth, head of Smiths Gore’s farms and estates agency. “The main driver of growth has been from capital value increases, which was higher than residential property, which had 5.9% capital growth, and prime commercial property, which saw capital values fall 2.2% over the same period,” he said. “We will see more capital growth this year – possibly as much as 7%.” Over the past five years, rural property has returned 8.9% per annum, against 0.7% from commercial property, 4.6% from residential, 2.1% from equities and 8.8% from bonds. Richard Liddiard, head of rural agency at Carter Jonas said that rural property had continued to stand out as an attractive capital hold since the downturn. “While values for commercial property almost halved in some areas and the volatility of equities deterred risk-averse investors, rural property values only dropped 0.4% in 2008 and have risen by an average of 7% per year since the start of the recession in 2008.” For the £2.7bn of assets measured by the index around the UK, which includes the Crown Estate, better prospects for farming have underpinned this capital growth, as well as the increasing appeal to investors of the potential for alternative use such as renewable energy. Lack of investment-grade property to buy remains a hindrance, with significant activity happening off-market. For smaller private investors, there are more opportunities, although lack of supply and stronger demand remain the key drivers of capital growth, said Tim Jones, head of Carter Jonas’ rural division, at the presentation of the Index. Providing the beneficial tax status of the sector, with IHT for own-occupied land, remained in place, this was unlikely to change, he said. Equally, the “long game potential” – whereby a development opportunity such as a shopping centre or housing estate 20 years in the future – can considerably hike up returns. Richard Liddiard of Carter Jonas adds: “The continued strength of rural investment property shows that it has a serious part to play in investment portfolios that need to off-set volatility and risk with stable, solid performance.” Continue reading
