To date Land Commodities’ buy-side focus has been the UK and Australia, although since 2011 our focus has switched almost exclusively to Australia due to its superior investment fundamentals. Indeed, for the agricultural investor, Australia offers arguably the most attractive risk adjusted returns of any major developed world producer.
When Land Commodities was first established in late 2008, we chose the UK as our ‘launch market’. This was driven partly by the management team’s past knowledge of the market, but also because of the buying opportunities that had arisen due to the collapse of much of the UK’s independent agricultural lending market in the wake of the financial crisis. In an agricultural version of the Northern Rock situation the majority of independent lenders were financed by short-term credit lines, however, their loan books were generally longer-term. Unlike Northern Rock, however, no bailout was provided to these institutions and many went under as their credit lines were pulled almost overnight.
The sudden freeze on anything but prime agricultural mortgages created some great opportunities for farmland investors as a flood of forced and distressed sellers hit the market. This window of opportunity was relatively short-lived, but during this time we were able to complete a large number of transactions on behalf of our clients. Many of these were purchase and leaseback deals, giving our investors all of the benefits of direct ownership and a stable income stream, whilst still allowing the selling farmer to continue operations.
We are now focused on Australia which has numerous advantages over the UK and many other western farmland markets. For instance, land prices per tonne of wheat produced are less than half what they are in the UK and the US and just under half what they are in Canada. Additionally, unlike many other developed markets, the Australian agricultural sector is profitable in the absence of government subsidies.
Although our primary focus is Australian rainfed arable and mixed arable-livestock farming, our team have extensive first-hand experience of managing a range of large scale agricultural enterprises, including irrigated arable, sheep and beef livestock, sugarcane, coffee, cocoa, rubber and citrus. Our team members have managed farms of these types in regions as far flung as UK and Australia to parts of Southern Africa and East Asia.
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