A growing number of investors are turning to agricultural real assets for the first time and existing agricultural investors are increasing their allocation to the asset class. For those who take the time to fully appreciate the fundamentals driving the farmland investment trend, it becomes very clear why.
The demand for farmland will continue to grow for the foreseeable future, yet its supply is fundamentally limited. Agricultural assets are unique compared to other resource investments in that, with the right management, they will continue to produce valuable commodities in perpetuity. Agricultural assets are an important part of the capital base of most large economies, yet constitute a tiny fraction of the average investor’s portfolio. This is despite having delivered superior risk adjusted returns over almost any time period than the other asset classes making up those portfolios.
In the coming decades the demand for farmland and the commodities it produces will exceed any other period in history by a significant margin. This is an indisputable fact. As such, agriculture represents an enormous opportunity for investors, both in terms of the sheer untapped scale of the asset class and the returns agricultural investors are likely to realise in the coming years.
Land Commodities was established on the premise that for an asset class so utterly compelling to be so heavily underinvested in, there must be a market failure with respect to access. We’ve been working hard ever since to address it.
Through our subsidiary In Western Australia, the country’s most reliable grain producing region, we are now the leading advisory firm by transaction volume, having completed over AU$ 80 million of transactions across 28 commercial scale farms in the first three quarters of 2012 alone. Australia has the lowest land prices (on a land cost per unit of production basis) of any major western agricultural economy and its commercial scale farms generate amongst the highest ex-subsidy return on capital.
Given our significant specialist expertise in Australia, Land Commodities is fast emerging as the go-to partner for the region which is now featuring most prominently in many agricultural investment portfolios.
From our Swiss and Australian offices we assist our clients at all levels of the investment process from initial research, due diligence and purchase through to tenanting, management and disposal. Our clients include institutional investors (including a Middle Eastern sovereign wealth fund), wealth management divisions of private banks, investment trusts, family offices and private investors (both large and small).
The diverse background of our team in agriculture, finance and investment brings a depth and thoroughness to our analytical approach that allows us to truly add value for our clients. Since the company’s inception in late 2008, the Land Commodities’ team have successfully undertaken over 200 farmland transactions totalling approximately 150,000 hectares of land area (to put this in perspective, this is an area of land larger than Greater London, or twice the total land area of Singapore).
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