Fields of opportunity - f.tlcollect.com › fr2 › 813 › 73366 › Rural_and... · RURAL & AGRIBUSINESS Cattle and Lamb Gross Unit Values The Australian weighted average saleyard

Fields of opportunityBuyer interest gains momentum

RURAL & AGRIBUSINESS

2013

Australia

Research and Forecast report

Accelerating success.

Improve your perspective. We have. Property Research worth talking about. www.colliers.com.au/subscribe

Colliers InternationalA leader in global real estate services, defi ned by our spirit of enterprise. Through a culture of service excellence and collaboration, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We represent property investors, developers and occupiers in local and global markets. Our expertise spans all property sectors – offi ce, industrial, retail, residential, rural, healthcare, hotel and retirement.

Colliers International is Australia’s own global real estate success story.

We have 200 research professionals in 90 offi ces on 6 continents

Accurate and objective property research should be the foundation of all good property decisions. Colliers International

provides reliable, unbiased and authoritative property research & investment property advice across all property sectors

and geographic markets within Australia and across the globe. We share our knowledge and experience to deliver

innovative and eff ective solutions and investment property advice. Our unique approach integrates people, experience,

systems, and technology to create meaningful business connections and client outcomes.

370 offi ces in

62 countries on

6 continents

United States 140

Canada 42

Latin America 20

Asia Pacifi c 83

EMEA 85

$2 billion in annual revenue

2.5billion square feet under management

13,500 professionals and staff


What is feeding investment? 5

Our Rural and Agribusiness perspective 8

Market Overview:

Emerging buying opportunities 10

Asia’s rising middle class increases demand 14

What are the drivers of price growth? 16

Water use and trading volumes at record highs 20

Our Rural and Agribusiness experience 22

Contents

How else can we help you?

Speak to one of our property experts today.

[email protected]

Partner with our Research and Consultancy team

Our highly experienced team of professionals can partner with you to ensure your next project has a positive outcome. we deliver strategic advice across a full range of property sectors, ensuring that your decisions are fully informed.

[email protected]

For more information about Colliers International

and working with us, visit;

www.colliers.com.au

Cover image: ‘Harvest at Beverleigh’ Dirranbandi QLD. Photographer Scott Bridle

3Rural & Agribusiness | Research & Forecast Report | 2013

4 A Colliers International publication


What is feeding investment? Strong investor interest in Australian Rural and Agribusiness properties has been a key feature of 2013. Foreign investors have been most active in the Sugar sector however interest in Wine and Large Cropping properties is on the rise. The other active buyer group has been existing owners looking to strategically acquire neighbouring properties. The performance of the Rural and Agribusiness sector will continue to be underpinned by exports, in particular, a rising middle class and a pickup in economic growth for our key trading partners, as well as the lower Australian dollar. Other fi ndings presented in this Report include evidence that farm and grazing land price increases have not been due solely to the arrival of new or corporate money and that water use and trading volumes, achieved record highs in the Murray Darling Basin (MDB) in 2012/13 .

By Mark CourtneyDirector | Research

[email protected]

While the Australian rural property market has remained relatively subdued over the last 12

months, there has been solid interest in specifi c sectors including the wine industry and larger

cropping properties in reliable rainfall districts. Demand has tended to focus on larger assets

off ering either economies of scale or value add opportunities. Buying strength has tended

to be concentrated in the hands of high net worth individuals or families, and institutional

investors - particularly off shore based funds and investment houses. Investments into the

sugar industry over the past three years provide a salient example of off shore purchasers that

have the capital and are prepared to take a longer term view on agricultural investment.

Global population pressures, a rising middle class within our trading partners and changing

consumer tastes continue to represent the key demand drivers for Australian commodities.

Over the long term, the national rural and agribusiness market appears well positioned for

growth due to the magnitude and expected longevity of these factors. With median forecasts

for the offi cial cash rate falling within a range of 2-2.5 per cent over the year ahead, AUD

may remain below parity with USD. An AUD value of below USD 0.90 would help Australian

commodity exporters achieve the “right” price points in their key markets over the year ahead.

Prices for most rural land classifi cations tended to increase strongly from 2000 to 2008

before easing after the GFC. Our general outlook is one of consolidation and therefore most

probably neutral land value movement over the next two years. However improved sentiment

appears to be starting to emerge within the neighbour to neighbour market as confi dence

starts to return and the recognition that we are probably past the bottom of the market in

many regions begins to take hold.

Because of its critical nature to all forms of agriculture, water will continue to be a key driver

of land and enterprise values into the future especially as global demand for soft commodities

continues to grow. Water usage and water trading volumes in the MDB were the highest on

record over the 2012-13 season. High allocations and relatively favourable temporary water

prices should prove attractive to irrigators throughout the growing season provided that

average weather patterns prevail.


Key indicator charts Major World Trading Partner Growth Projections

United States economic growth is assumed to be 1.9 per cent

in 2012-13, before strengthening to 2.3 per cent in 2013-14

consistent with an expected improvement in housing and labour

markets. China remains resilient to both internal and external

shocks with an expected pick up from 7.1% in 2012-13 to 7.8 per

cent next year. Japan’s economic growth is forecast to pick up to

1.7 per cent next year while growth in the Eurozone is anticpated

to strengthen to 0.1 per cent next year from -0.7 per cent in

2012-13. Deloitte Access Economics forecast for Australia shows

a slight moderation from 2.9 per cent this year to 2.6 per cent

next year.

Offi cial Cash Rate

The Reserve Bank of Australia (RBA) maintained the offi cial cash

rate at 2.50% in August. The key reasons stated by the Bank

included:

• Overall, global fi nancial conditions remain very accommodative

• In Australia, the economy has been growing a bit below trend over

the past year

• Infl ation has been consistent with the medium-term target.

• The Australian dollar has depreciated by around 15 per cent since

early April, although it remains at a high level.

• The cash rate is forecast to be between 2 – 2.5 percent over 2014

Wheat Gross Unit Values

ABARES anticpates a fall of 10 per cent for the world wheat

indicator in 2013-14. The expected fall is largely due to the

combined eff ect of an expected increase in world wheat

production due to the drought-aff ected 2012-13 season. Forecast

higher world corn production, which is expected to reduce

demand growth for wheat used in livestock feed is also expected

to impact on wheat prices.

Source: Deloitte Access Economics / Colliers International

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2008-09 2009-10 2010-11 2011-12 2012-13(f) 2013-14(f)

United States Japan Eurozone China Australia

GDP - AUSTRALIA AND WORLD TRADING PARTNERS

0%

1%

2%

3%

4%

5%

6%

7%

Dec-0

8

Jun-0

9

Dec-0

9

Jun-1

0

Dec-1

0

Jun-1

1

Dec-1

1

Jun-1

2

Dec-1

2

Jun-1

3

Dec-1

3

Jun-1

4

Dec-1

4

Cash

Rate

(%

)

RBA Cash Rate

5-year average

Forecast

RESERVE BANK OF AUSTRALIA OFFICIAL CASH RATE FORECAST

Source: RBA / ANZ / CommBank / Goldman Sachs / Macquarie Research / Merril

Lynch / NAB / UBS / Westpac/ Colliers International

0

50

100

150

200

250

300

350

2008–09 2009–10 2010–11 2011 –12 2012–13 (f) 2013–14 (f)

$/t

281

218

257

227

342

305

GROSS UNITS VALUES - WHEAT

Source: ABARES June Quarter 2013 / Colliers International



Cattle and Lamb Gross Unit Values

The Australian weighted average saleyard price of beef cattle is

forecast to fall by 5 per cent in 2013-14 to 280 cents a kilogram

(dressed weight). Increased supplies of slaughter cattle into

saleyards and lower demand for restocker cattle are expected to

continue placing downward pressure on cattle prices in the short

term. The Meanwhile ABARES expect the Australian weighted

average saleyard price for lamb will increase rise by around 5 per

cent in 2013-14 to average 400 cents a kilogram. The anticpated

rise refl ects the combined eff ect of lower supplies and growing

demand from our main overseas markets.

Wool Gross Unit Values

Forecast wool prices show a strengthening in 2013-14 which

refl ectss the eff ects on wool demand of an ongoing economic

recovery in the United States and robust economic growth in

China. This may be amplifi ed by an expected contraction in global

supplies of wool. Off setting these rising pressures is the subdued

nature of European and Japanese demand which together will

likely hold back any signifi cant improvement in the wool market in

the near term.

Cotton Gross Unit Values

World indicator price for cotton is tipped to rise by 3.4 per cent

in 2013-14. The increase refl ects an expected lower world cotton

production and growth in world cotton consumption, combined

with an expected ongoing build-up of China’s cotton reserve. The

stocks-to-use ratio for the world as a whole is forecast to rise to

a record in 2013-14. When China is excluded however, ABARES

notes that this ratio would be the lowest since 2003-04.


GROSS UNIT VALUES - COTTON

0

100

200

300

400

500

600

c/k

g

320

415

311

444

336

519

337

465

304

383

288

400

2008–09 2009–10 2010–11 2011 –12 2012 –13 (f) 2013 –14 (f)

Beef Cattle Lambs

GROSS UNIT VALUES - BEEF CATTLE AND LAMBS


0

100

200

300

400

500

600

700

800

2008–09 2009–10 2010–11 2011 –12 2012 –13 (f) 2013 –14 (f)

c/k

g

430456

623

695

571603

GROSS UNIT VALUES - WOOL


0

50

100

150

200

250

300

350

400

2008–09 2009–10 2010–11 2011 –12 2012 –13 (f) 2013 –14 (f)

c/k

g

193205

377

225

196213


LAND VALUES The key drivers influencing farming and grazing land values include:

Throughout most of Australia during period 2002 to 2009, land prices for both farming and grazing land have continued to increase before easing after the GFC. The main drivers of this increase were largely due to:

Low/stable interest rates

High confidence levels in ‘neighbour’ to ‘neighbour’ transactional activity

Managed Investment Scheme (MIS) activity

An increase in corporate and institutional activity

Availability of bank financeWATER Water use in the southern Murray Darling

Basin hits a record high in 2012/13

2013 2014 2015 2016 2017 2019 2022The Murray-Darling Basin Plan became law. Monitoring and evaluation of Plan Implementation commences.

Basin environmental water strategy published.

Long term State environmental watering plans published.

The Sustainable Diversion Limits (SDLs) established

State water resource plans reviewed and Environmental watering plan, water quality and salinity targets reviewed.

SDL’s which determine how much water can be removed from river systems for consumptive use come into effect and all State water plans revised in line with Basin Plan

Basin Plan reviewed

Low interest rates should help exporters compete on prices

Reserve Bank of Australia Official Cash Rate ForecastGDP - Australia and World Trading Partners8%

7%

6%

5%

4%

3%

2%

1%

0%

Cash

Rat

e (%

)

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

RBA Cash Rate Forecast

China Australia Eurozone United States Japan

12.0%10.0%8.0%6.0%4.0%2.0%0.0%

-2.0%-4.0%-6.0%-8.0%

2008-09 2009-10 2010-11 2011-12 2012-13(f) 2013-14(f)

Other

United States

New Zealand

United Kingdom

Japan

Asia - Other

Rep. of Korea

Indonesia

China

2006-07 2011-12Trading Partner: Share of Exports

Export Share % 0.0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4

EXPORT MARKETS Rising middle class of Asia is driving consumption and increasing demand.

ABARES expects values to remain relatively steady in our key sectors over the near term

ABARES Gross Unit Values Forecast

2012-13 (f) 2013-14 (f) All values in c/kg except Wheat which is $/t

800

600

400

200

Wool Lamb Beef Cattle Cotton Wheat

INVESTMENTt Foreign firms have taken strategic positions globally

Demand for large assets offeringEconomies

of scaleValue add

opportunitiesForeign Investment Into Australia in the last 2 years by large multi-nationals

Sugar Wine Dairy

Forestry Cropping & Grazing

WANT QLD

WASA

NSW

VIC VICTAS

WASA

VICTAS

VIC

WASA

NSW

QLD

Singapore Thailand Belgium China NZ China Japan USA France UK Sweden China NZ

Sweden USA Canada NZ China USA UAE Sweden

LAND VALUES The key drivers influencing farming and grazing land values include:

Throughout most of Australia during period 2002 to 2009, land prices for both farming and grazing land have continued to increase before easing after the GFC. The main drivers of this increase were largely due to:

Low/stable interest rates

High confidence levels in ‘neighbour’ to ‘neighbour’ transactional activity

Managed Investment Scheme (MIS) activity

An increase in corporate and institutional activity

Availability of bank financeWATER Water use in the southern Murray Darling

Basin hits a record high in 2012/13

2013 2014 2015 2016 2017 2019 2022The Murray-Darling Basin Plan became law. Monitoring and evaluation of Plan Implementation commences.

Basin environmental water strategy published.

Long term State environmental watering plans published.

The Sustainable Diversion Limits (SDLs) established

State water resource plans reviewed and Environmental watering plan, water quality and salinity targets reviewed.

SDL’s which determine how much water can be removed from river systems for consumptive use come into effect and all State water plans revised in line with Basin Plan

Basin Plan reviewed

Low interest rates should help exporters compete on prices

Reserve Bank of Australia Official Cash Rate ForecastGDP - Australia and World Trading Partners8%

7%

6%

5%

4%

3%

2%

1%

0%

Cash

Rat

e (%

)

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

RBA Cash Rate Forecast

China Australia Eurozone United States Japan

12.0%10.0%8.0%6.0%4.0%2.0%0.0%

-2.0%-4.0%-6.0%-8.0%

2008-09 2009-10 2010-11 2011-12 2012-13(f) 2013-14(f)

Other

United States

New Zealand

United Kingdom

Japan

Asia - Other

Rep. of Korea

Indonesia

China

2006-07 2011-12Trading Partner: Share of Exports

Export Share % 0.0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4

EXPORT MARKETS Rising middle class of Asia is driving consumption and increasing demand.

ABARES expects values to remain relatively steady in our key sectors over the near term

ABARES Gross Unit Values Forecast

2012-13 (f) 2013-14 (f) All values in c/kg except Wheat which is $/t

800

600

400

200

Wool Lamb Beef Cattle Cotton Wheat

INVESTMENTt Foreign firms have taken strategic positions globally

Demand for large assets offeringEconomies

of scaleValue add

opportunitiesForeign Investment Into Australia in the last 2 years by large multi-nationals

Sugar Wine Dairy

Forestry Cropping & Grazing

WANT QLD

WASA

NSW

VIC VICTAS

WASA

VICTAS

VIC

WASA

NSW

QLD

Singapore Thailand Belgium China NZ China Japan USA France UK Sweden China NZ

Sweden USA Canada NZ China USA UAE Sweden

While the Australian rural property market has remained relatively

subdued over the last 12 months, there has been solid interest in

specifi c sectors including the wine industry and larger cropping

properties in reliable rainfall districts. Demand has tended to

focus on larger assets off ering either economies of scale or value

add opportunities. Buying strength has tended to be concentrated

in the hands of high net worth individuals or families, and

institutional investors - particularly off shore based funds and

investment houses. It is these buyers that have the capital and are

prepared to take a longer term view on agricultural investment.

As indicated in past research releases, the back bone of

Australian rural property market tends to sit with neighbour to

neighbour demand. Up until relatively recently, there has been

a general shortage of available listings and this coupled with

domestic capital constraints has in our view tended to restrict

buyer activity. This has generally been the case for most probably

the last two to three years. However, it appears that pent up

demand coupled with an increase in listing numbers as vendors

enter the ‘spring selling season’, has set the scene for an increase

in buyer activity at a local level.

We believe that there are several areas which will off er potential

opportunities for good buying over the next 12 months. These

include Northern Australian cattle properties and possibly the

fi sheries sector (notably wild caught abalone) where an easing

AUD should assist export opportunities. The Western Australian

wheat belt is also an area that has endured diffi cult seasonal

conditions in recent years. Our research suggests there are a

signifi cant volume of properties available and as a consequence,

good buying opportunities may emerge in some districts within

the wheat belt. Finally, there has been signifi cant expansion in

poultry broiler farming and this appears to be starting to slow.

However, we still regard this sector as a stand-out in terms of its

cash generating capability.

On the theme of looking forward, commodity price movements

and the AUD level are expected to be key investment drivers

within the agribusiness sector. Any strengthening trends for

our major export commodities notably wheat and other cereals,

legumes, oilseeds, beef, sheep meat and wool, should assist

in focussing both local and off shore buyers on rural property

investment opportunities.

The Australian rural property market in general terms is

anticipated to track in a neutral manner for the next two years,

while a sustained rise in commodity prices could trigger some

capital appreciation over this time.

The table on the page opposite shows the diversity of the market

through a selection of signifi cant Rural and Agribusiness sales

which transacted since June 2012.

INVESTMENT

Emerging buying opportunities

2013


Leppington Pastoral Company, Western Sydney NSW

Valued by Colliers International.



Type Property Name Address StateSale Date

Sale Price

Property size (ha)

Vendor Purchaser

Beef Cattle Glen Prairie Via Malbrough central Queensland Qld Jun-12 $28,000,000 29,913.00 Private Private

Beef Cattle Lotusvale via Normanton Qld Jun-13 $18,200,000 125,000.00 Arabie Pastoral Co Private

Beef Cattle Brighton Downs via Winton Qld Jun-13 $18,000,000 422,535 Australian Agricultural Co. Private

Cotton Mobandilla via Goondiwindi Qld Jun-13 $12,400,000 5,443.00 PPB Advisory WealthCheck & Norman Farming Co

Cropping Livingston Farms Newell Highway, Moree NSW Jul-13 Approx $20m 4,332.95 Undisclosed Undisclosed

CroppingDerrinallum-Skipton Road,

DerrinallumVic Feb-13 $7,854,500 1,936.00 Mermin Pty Ltd

Mt Elephant PastrolPty Ltd

Cropping WelcannahCome Lucky, Ellerslie

& Feedlot, Halls Creek-Burrington Rd, Moree

NSW Dec-12 $9,275,000 2,005.71 Private Private

Cropping East Farm Sturt Highway, Hay NSW Dec-12 $5,800,000 6,213.55 Harris Tandou

Dairy Bass River Run 110 Lock Kernto Rd, Kernto Vic Dec-12 $6,400,000 241.00 PrivateAustralian YoYou dairy

Pty Ltd

Grazing/cropping Aroona & Shao Lu Fisheries Road, Boyatup WA Jun-13 $43,256,000 13,635.05 Cannan Farms P/LWarakirri Asset Manage-

ment P/L

Horticulture Northern Citrus Kidman Way, Hillston NSW May-13 $12,500,000 393.18 Undisclosed Undisclosed

SugarMosman central milling

CompanyQld May-12 $25,300,000

Mossman Central Milling Co Ltd

Mackay Sugar Ltd

Sugar Black riverMarwood Farm Via Sarina in

Central QldQld Mar-13 $10,500,000 1,010.00 Undisclosed

Black River Asset Management/ Mackay

Sugar

Wine Kirribilly Vineyard portfolioMargaret River Region WA, Riverland and Mclaren Vale

SASA/WA 2013 $12,210,000 Cherviot Kirribilly Undisclosed

Wine Barossa Valley Wine Portfolio Barossa Valley region SA Jul-13 $5,835,000 Private Undisclosed

Mixed UardryMurrumbidgee River Road,

CarrathoolNSW Oct-12 $28,000,000 34,618.00 Charles Mills Uardry PL Private

Mixed Cobran StationMurrumbidgee River Road,

CarrathoolNSW Nov-12 $18,400,000 17,201.00 Undisclosed Undisclosed

Mixed Dellapool Dellapool Road, Narrandera NSW Jun-12 Undisclosed 1,788.20 Undisclosed Undisclosed

SELECT SIGNIFICANT RURAL AND AGRIBUSINESS SALES (+$5 million)

Lactanz Dairies, Western Australia

For sale by Colliers International


The level of foreign interest in sugar milling assets has been a

notable feature of Australian agribusiness with acquisitions by

Wilmar International of Singapore, Thai sugar giant Mitr Pohl, the

China National Cereals, Oils and Foodstuff s Corporation (COFCO),

Belgian based sugar producer Finasucre and Shanghai based

multinational food and beverages manufacturer Bright Foods. The

scale of some of these investments cannot be understated. For

example, in late 2012, Shanghai Zhongfu Group was appointed as

the preferred proponent to deliver the long-awaited Stage 2 of the

Ord-East Kimberley Expansion Project. Through their Australian

subsidiary Kimberley Agricultural Investment Pty Ltd (KAI),

Shanghai Zhongfu plans to develop the Goomig Farm Area and

the Knox Plain within the Ord River Stage 2 area for large-scale

sugar production. In the order of four million tons of sugar cane

and 500,000 tons of sugar crystal are expected to be produced

for export each year from this venture alone.

The world sugar industry that comprises the farm gate (sugar

cane), processing (sugar mills), manufacturing (refi neries) and

distribution (ports and shipping) is a signifi cant global industry

that contributes a high volume to Gross Domestic Product (GDP)

worldwide. ABARES estimates that, sugar is produced in over 90

countries with global raw sugar production forecast to be a record

177.6 million tonnes in 2012/13, 2.5 million tonnes more than the

prior year. Approximately 70 per cent of raw sugar is consumed

domestically with the balance being traded on world markets. The

top 10 countries or regions that are considered the major players

in this industry include China, India, Indonesia, Thailand, Australia,

Africa, the European Union (EU), Russia, NAFTA (US & Mexico)

and Brazil.

It is likely that the key drivers of demand will continue to be

growth in global population and incomes and changing diet

preferences. In the ten years leading up to 2009/10 it is estimated

that world sugar consumption increased at a rate of 2.5 per cent

per annum, and coupled with the above factors it is likely that

consumption will continue to rise at the same rate if not higher,

particularly given the likely growth within China and India.

The Australian sugar industry, by world standards is considered

to form a key component to total world production. The industry

is the 3rd largest raw sugar exporter in the world and is the

7th largest agricultural exporter in Australia with 80 per cent

of produce exported overseas. Australia holds a competitive

advantage for transport given our close proximity Asian markets.

In terms of raw statistics sugar cane contributes approximately

$1.70 to $2.00 billion in production which is derived from around

4,000 cane farms, 30 to 35 million tonnes of cane, 4.0 to 4.5

million tonnes of raw sugar, 24 sugar mills and six bulk storage

ports. Australia’s sugarcane is grown in high-rainfall and irrigated

districts areas along coastal plains and river valleys on 2,100 km

of Australia’s eastern coastline - between Mossman in far north

Queensland and Grafton in New South Wales. Australia has 24

sugar mills which crush an average 10,000 tonnes of cane daily.

Cane is transported to the mills by cane railway and road.

Australia’s major exporting regions include East Asia, China,

Indonesia, Japan, Korea, Malaysia, Taiwan, the USA and New

Zealand. Australia’s capacity to store over two million tonnes

of sugar in a network of bulk port terminals, allows it to supply

customers throughout the year and helps the strong export

focus of the country. Australia essentially provides a secure

supply chain to the growing Asian region, which otherwise has to

increasingly rely upon Brazil for supply.

CASE STUDY

The sweet spot for

strategic investment

Mackay Sugar Group, Northern Queensland

Valued by Colliers International



68.00

68.50

69.00

69.50

70.00

70.50

71.00

71.50

72.00

72.50

73.00

73.50

22.50

23.00

23.50

24.00

24.50

25.00

25.50

26.00

26.50

27.00

27.50

28.00

2012

/13

Est

2013

/14f

2014

/15f

2015

/16f

2016

/17f

2017

/18f

2018

/19f

2019

/20f

2020

/21f

2021

/22f

2022

/23f

Area (Million Hectares) Yield (Tonnes/Hectare) RHS

Source: OECD-FAO Agricultural Outlook 2013: Highlights & Colliers International Research

FORECAST WORLD SUGAR CANE AREA AND CROP YIELDS

How else can we help you?Speak to one of our property experts [email protected]

For further information about our research please contact: Kate Gray Associate Director | Research | Tel +61 8 8305 [email protected]


Global population pressures, a rising middle class within our

trading partners and changing consumer tastes are driving demand

for Australian soft commodities. Over the long term, the national

rural and agribusiness market is well positioned for growth due to

these factors. In addition, our stable democratic society, rule of law,

highly skilled workforce and geographic proximity to Asian markets

enhances the opportunities in the market.

Production for the farm sector is at all-time highs with $48.885

million of farm production to December 2012 according to

ABARES. Forecasts suggest a further 2.9% increase in farm

production during the 2013-14 year with signifi cant increases

in grain production being the main driver of this growth. A

signifi cant depreciation of the Australian dollar recently has led

to the index of rural commodity prices easing signifi cantly over

the last 12 months. There has however been a level of volatility

in the Australian dollar which is likely to continue over the next

12 months, so producers will need to manage the risk of further

exchange rate fl uctuations.

Forecasts from ABARES suggest farm commodity export

earnings to be 3.2% lower in 2013-14 compared to 2012-13. This

is due to lower export earnings forecasts for the barley, wheat,

cotton, sugar, canola, lamb/mutton, and rice and wool sectors.

Wheat and Beef/Veal continue to be the two major agriculture

sector contributors to exports which accounted for nearly 30% of

total export volumes. Looking more closely at wheat – Australia

production is expected to increase by 15% with total world

production of wheat forecast to increase 2% over the 2013-

14 year. The global increase in production is due to signifi cant

increases in production in the Russian Federation and European

Union. Total consumption of wheat is also forecast to rise globally

with increases in both for both human and livestock consumption.

Export volumes from Australia are however forecast to fall for

both 2012-13 and 2013-14 years.

EXPORT MARKETS

Asia’s rising middle class increases demand

2013


Coonawarra Premium Vineyard Portfolio, SA

Sold by Colliers International for $5.25 million.



Beef and veal production is forecast to rise by 5%, but this

increase in production has resulted in lower prices. Beef and veal

exports are forecast to continue to reach record highs over the

next two years. Japan, US and Korea remains a strong trading

partner in this sector. China is gathering pace as a growing

trading partner for the beef and veal sectors. Australia has seen

a signifi cant shift in the key trading partners over the last decade.

China, Korea, Vietnam Saudi Arabia and Indonesia have become

signifi cant trading partners within the wheat sector over the last

decade with signifi cant increases in volumes being exported to

these regions. Wool has also seen strong growth in exports to

China over the last decade. Beef/veal has strong export markets

in Japan and Korea which have grown over the last decade, and

the US which has seen both volume and value exported fall in this

time. The wine sector has seen volumes exported to the UK, US,

Canada and China continue to grow, although the value of these

exports has come under pressure over the last decade.

The eff ort to establish Australian brands for all of commodities

in key markets at the “right” price point and quality will continue

to be infl uenced by the movement of AUD over 2013-14. With the

median forecast for the offi cial cash rate falling around 2-2.5%

in the year ahead, AUD may remain below parity with USD. An

AUD value of $US0.90 and below would certainly assist exporters

achieve the “right” price points in their key markets.

5.000

0

10,000

15,000

20,000

25,000

2008–09 2010–112009–10 2011–12 2012–13 (f) 2013–14 (f)

kt

13,410 13,715

18,431

23,026

21,85020,759

840

860

880

900

920

940

960

980

1,000

1,020

2008–09 2010–112009–10 2011–12 2012–13 (f) 2013–14 (f)

kt

968

899

937

948

975

1,000

Source: ABARES / Colliers International Research

Source: ABARES / Colliers International Research

VOLUME OF WHEAT EXPORTS AUSTRALIA

VOLUME OF BEEF AND VEAL EXPORTS AUSTRALIA

Berry & Citrus Portfolio, NSW, SA & TAS



For further information about our research please contact: Kate Gray Associate Director | Research | Tel +61 8 8305 [email protected]


One of the most interesting questions regarding rural land prices

is this: Is new money in agriculture driving up property prices?

Recently Colliers International provided some insight into on

this topic by way of a number of case studies one of which is

presented in the following pages.

New money in agriculture can be defi ned as money that is coming

into an area from any source that was not there beforehand.

This excludes transactions that may occur between local farmers

or even farmers that have sold out or have existing equity in

agriculture, typically ‘family investment houses’. New money is

referring to investment that is coming from on-shore or off -shore

investment houses be it superannuation, hedge funds, sovereign

funds and many others including mining. This new money is

typically raised from activities outside of agriculture.

In recent years, there has been a signifi cant weight of capital

raised both from onshore and off shore investment houses looking

for investment in rural and agribusiness opportunities. Billions of

dollars have collectively been raised by TIAA CREF, Laguna Bay

Pastoral, Southern Agriculture Resources, Macquarie Agriculture

Fund (Lawson Grains), the Sustainable Agriculture Fund,

Australian Food and Fibre and many others.

LAND VALUES

What are the drivers of price growth?

2013


Uardry, Hay NSW

Sold by Colliers International.



Historically, rural property values have tended to respond to

specifi c triggers, such as structural change, new technological

improvements in productivity or more commonly, commodity

price increases. Other factors such as interest rates and currency

fl uctuations can account for movements in value as can seasonal

conditions.

Notwithstanding the ongoing drought throughout most of Australia

during the last decade, prices for both farming and grazing land

increased from 2000 to 2008 before easing as a consequence

of the post GFC withdrawal of capital. The main drivers of this

increase were largely due to;

1. Low/stable interest rates

2. Ready availability of bank fi nance

3. High confi dence levels in ‘neighbour’ to ‘neighbour’

transactional activity;

4. Managed Investment Scheme (MIS) activity throughout most

areas of Australia for forestry in particular, and later on

horticulture (up to 2007/8);

5. An increase in corporate and institutional activity driven in part

by a positive commodities outlook and increased allocations of

funds to alternate assets including agriculture.

Boar’s Rock Winery Portfolio, WA & SA

Sold by Colliers International.

Portfolio of fi ve pastoral stations, SA



The Moree district has been the focus of considerable corporate

and institutional investment. In recent years with demand mainly

focussed on large cropping holdings. The region has been

identifi ed by this sector as representing favourable value from

production (winter and summer cropping), water security, access

to labour and markets, and value for money perspective. Some of

the main purchasing activity in the region has been corporate and

institutional based and includes Macquarie Bank related entities,

(Lawson Grains), the Westchester Group of Australia (via related

entities), Australian Food and Fibre, the Sustainable Agriculture

Fund and the Warikirri Agriculture Trust to name a few.

The longer term trend for land value movement in the region

is one of growth, although this has not necessarily been on a

“year-on-year” basis. Analysis and enquiry has disclosed that

after a signifi cant decrease in the late 1980s rural property values

remained fl at with several peaks and troughs up until 2001 where

the area achieved solid growth during the three to fi ve year period

leading up to the 2008 global fi nancial crisis, with values trailing

off post 2009 after residual 2008 settlements were recorded.

Aside from global fi nancial impacts, the region also encountered

season related diffi culties including droughts (2005-2007)

followed by fl oods and heavy rain events in 2010 and 2011 which

served to further moderate buyer activity.

Post 2008 it is considered that the main impact of the market

challenges were felt by the “neighbour to neighbour” market,

where demand and transactional activity was relatively

constrained. Arguably it is this sector that traditionally underpins

market value over the longer term. While established local

(non-corporate) producers were restrained in their expansion

activities, the demand for larger properties, particularly those

with a strong cropping focus remained relatively fi rm. Many of

these buyers have longer term investment mandates involving the

establishment of business that will be positioned to capitalise on

predicted future global demand for food and protein.

The graph on the opposite page illustrates the longer term picture

in relation to average land values within the Moree LGA that have

been adjusted to exclude infl ation. There is a signifi cant degree

of year on year volatility that in our view tends to overstate the

reality the market’s performance. This is mainly due to the varying

volume of transactions within the data set analysed. The trend

line on the below graph indicates a historic ‘real’ long term mean

linear land value trend, which shows an approximate increase of

6.26% per annum (simple growth), noting that during this time

there were variations in annual growth from +47% to -27%, a

highly variable range.

Interestingly, if the minimum area for the model is changed to

250 hectares then the long term mean linear trend moves to

9.23% (simple growth), indicating that larger property appears

to have achieved a higher rate of growth over this time period.

From 2009 to 2011 the mean land values have decreased. In 2012

however the mean again rebounded with a rise in level of interest

in the market place for rural property, mainly from high wealth

individuals and corporates.

When the data set is analysed in term of corporate investment,

approximately 4.7% of land (by area) has transacted to corporates

in the last 28 years or 12.2% of total dollar value of transactions

(approximately $165 million of a total transactional value of

approximately $1.355 billion).

In summary, corporate investment has not appeared to have

any distortionary eff ect on rural property values in the Moree

region. One of the key reasons for this may lie in the fact that

any corporation buying land has to (in most cases) undertake

signifi cant due diligence with a mandate to achieve returns for

shareholders and investors. The only real eff ect from corporates

is that they may have more investment funds available, or superior

access to capital than existing local farmers trying to expand and

this is often what is reported in the media.

CASE STUDY

Corporate investment

and Moree land values

Pegela Pastoral Group, NSW




Index (Real) Linear (Index (Real))Volume of Transactions

0

10

20

30

40

50

60

70

80

90

100

0

0.5

1

1.5

2

2.5

1990

19

91

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

20

11

2012

Volu

me o

f Tra

nsa

ctions

Index

Source: Colliers International Research & Consultancy & RP Data

MOREE LAND VALUE (MEAN) TREND ANALYSIS (1990 TO 2012) +100HA

Pegela Pastoral Group, NSW

Valued by Colliers International


For further information about our research please contact: Mark CourtneyDirector | Research | Tel +61 438 986 [email protected]


Water is critical for all forms of agriculture and will continue

to be a key driver of land and enterprise values into the future

especially as global demand for soft commodities continues to

grow. The costs of irrigating are increasingly being scrutinised

by farmers with electricity, irrigation scheme charges, and

consumption charges all substantially rising over recent times.

Agricultural regions which enjoy good water security and

properties which feature best practice irrigation infrastructure,

large delivery entitlements and water entitlements/shares

will continue to attract investor demand and support viable

enterprises.

The 2012-13 irrigation season experienced excellent growing

conditions for the majority of irrigated commodities grown

throughout the Murray Darling Basin (MDB) and the other major

regulated water markets of southern Australia. Subsequently

water usage and water trading volumes in the MDB were the

highest on record over the 2012-13 season.

Above average rainfall in two out of the past three seasons and

average 2013 winter infl ows have boosted the major water

storage volumes. Irrigation allocations have been excellent for

irrigators in recent times and in 2013-14 are predicted to reach

full allocation along the major river systems.

This vast quantity of water and high allocations has transpired

into permanent water values on average contracting over the past

two to three year period by 15% to 30%. The chart below shows

the trend of easing in prices as well as volumes in the Greater

Goulbourn Zone 1A. This is a signifi cant catchment of Northern

Victoria incorporating a range of agricultural land uses and

represents an insightful indicator of the pattern of the permanent

water trading market throughout the broader MDB

WATER

Water use and trading volumes at record highs

2013


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Megalitr

es

Price per ML ($) Linear Trendline ($/ML)Volume Traded (ML)

11/0

7/20

1111

/08/

2011

11/0

9/20

1111

/10/

2011

11/1

1/20

1111

/12/

2011

11/0

1/20

1211

/02/

2012

11/0

3/20

1211

/04/

2012

11/0

5/20

1211

/06/

2012

11/0

7/20

1211

/08/

2012

11/0

9/20

1211

/10/

2012

11/1

1/20

1211

/12/

2012

11/0

1/20

1311

/02/

2013

11/0

3/20

1311

/04/

2013

11/0

5/20

1311

/06/

2013

11/0

7/20

1311

/08/

2013

Source: Colliers International and Victorian Water Register

GREATER GOULBURN, VIC ZONE 1A HIGH RELIABILITY WATERTRADES



The 2012-13 irrigation seasons was marked by a number

of signifi cant policy changes. The most signifi cant was the

establishment of the Murray-Darling Basin Plan as law. Its

signifi cance lies in the magnitudes of its reach with the largest

group of water holders in the country being aff ected by this

policy development. A raft of implementation steps and legislative

changes will occur over the coming years with the Commonwealth

Government planning to save through infrastructure changes and

purchasing of entitlements approximately 1,562 gigalitres (GL) by

2024 to meet an environmental savings target of 3,200GL. We

note there is the potential for The Commonwealth to distort water

markets when they are an active trader. Another key component

of the Basin Plan will be the Sustainable Diversion Limits (SDLs)

that determine how much water can be removed from river

systems for consumptive use come into force by 2019.

2013-14 water use by key commodities producers is predicted to

largely mirror the 2012-13 production year. High allocations and

relatively favourable temporary water prices will prove attractive

to irrigators throughout the growing season if average weather

patterns prevail. Annual crops such as rice, cotton, oilseed and

pasture are predicted to be signifi cant users if commodity prices

continue to appreciate and the AUD continues to fall. Outside of

seasonal conditions these two factors play a major role in the

demand for water.

Permanent plantings such as grapes, stone fruits and almonds

all experienced very high production levels in 2013 on the back

of high water allocations available for irrigators. Water demand

from almond producers is expected to continue to rise in the

MDB as signifi cant areas of orchards mature and their irrigation

requirements increase.


For further information about our research please contact: Mark CourtneyDirector | Research | Tel +61 438 986 [email protected]

Yarrawonga Weir, Murray Darling Basin

Source; MDBA; Photographer Arthur Mostead


170 properties totalling over 300,000 hectares, with a value in excess of $500 million

Our experience



Uardry

Hay, NSW

c. $30 million

One of Australia’s most signifi cant

pastoral holding comprising

34,618 hectares.

North Queensland Horticulture Portfolio

North Queensland Sugar Belt

$15 million

44 separate sugar cane properties

with a total of 3,965 hectares.

Boar’s Rock Winery Portfolio

WA & SA

c. $22 million

Three separate wineries — combined

capacity of approx. 60,000 tonnes.

Kirribilly Vineyard Portfolio

SA

$12.21 million

Six separate vineyards — combined

planted area of approx. 780 hectares.

Rewards Horticultural Portfolio

WA, QLD

$11.25 million

Diversifi ed horticultural portfolio

comprising substantial plantings of

tropical and stone fruit.

Dukes Plain

Theodore, QLD

$6 million

One of Queensland’s largest

environmental off set assets to achieve

Origin Energy’s EIS requirements.

Barossa Valley Vineyard Portfolio

Barossa Valley, SA

$6 million

Four quality vineyards with a

combined planted area of approx.

100 hectares.

Coonawarra Premium Vineyard

Portfolio. Coonawarra, SA

$5.25 million

Large scale irrigated vineyard —

over 300 hectares of vines.

Yalanga Station

Noosa Hinterland, QLD

$3.8 million

Large grazing property comprising

of 1,642 hectares in the Noosa Region

with airfi eld.

Banero Broiler Farm

Mallala, SA

$3.06 million

Free range broiler farm with a long

term supply contract to major poultry

processor — 180,000 bird capacity.

Russell Vineyard Portfolio

Barossa Valley, SA

$2.28 million

Four premium quality Barossa Valley

vineyards — combined planted area of

approximately 20 hectares.

Ross Estate Wines

Barossa Valley, SA

$6.4 million

Boutique vertically integrated wine

business strategically located in the

heart of the wine region.

sold

IN THE LAST 18 MONTHS


338 assets totalling over 2.5 million hectares, with a value in excess of $3 billion

For more information about Colliers Internationaland working with us, visit;www.colliers.com.au

Mackay Sugar Group

Northern Queensland

Infrastructure

Sugar Milling Portfolio producing

approx. 6 million tonnes per annum.

Poultry Breeder Farm Portfolio

NSW & SA

Poultry

Portfolio of four leased Chicken

Breeder Facilities.

Leppington Pastoral Co.

Western Sydney, NSW

Dairy

Modern dairy housing 2,000 cows in

two large free stall barns.

Pegela Pastoral Group

Moree & Croppa Creek, NSW

Cropping

Dry Land Cropping and Grazing

Portfolio approx. 21,000 hectares.

Berry and Citrus Portfolio

NSW, SA & TAS

Horticulture

Blueberry, raspberry, blackberry

and citrus Portfolio.

Australian Forestry Plantations

Trust (AFPT) Portfolio. TAS

Forestry

Tasmanian Hardwood Property

Portfolio.

Belvino Wine Trust Portfolio

All major wine regions

Vineyards

Mix of cool and warm climate

irrigated vineyards.

Portfolio of Five Pastoral Stations

SA

Pastoral

Acted for Commonwealth Department

of Defence in the expansion of the

Cultana Army Training Area.

Green Triangle Softwood Portfolios

VIC & SA

Forestry

Approximately 60,000 hectares

across two separate portfolios.

Abalone Fisheries Licences

VIC & SA

Fisheries

Wild catch Abalone Licences

and Associated Quota.

McWilliams Portfolio

NSW, SA & WA

Wineries

Portfolio of three wineries

and ten vineyards.

Portfolio of Nine Cropping properties

WA

Cropping

Nine prime cropping properties

in the Central Wheatbelt approximately

7,500 hectares.

valued

AUSTRALIA


How else can we help you?

Speak to one of our property experts today.www.colliers.com.au

We off er a full range of property solutions...

• Agency Sales & Leasing

− Landlord Representation

− Tenant Representation

• Capital Markets

• Consultancy

• Corporate Solutions

• Design

• Development

• Facilities Management

• Financial Management

• Investment Services

• Insolvency Property Services

• Lease Administration

• Portfolio Management

• Portfolio Marketing

• Project Leasing

• Project Management

• Project Marketing

• Property Management

• Research

• Technology Solutions

• Transaction Management

• Valuation

• Workplace Strategy

Across every property type...

• Offi ce

• Industrial

• Retail

• Residential

• Rural & Agribusiness

• Hotels

• Healthcare & Retirement

Everywhere

• 370 offi ces worldwide throughout 62 countries

• 46 offi ces throughout Australia and New Zealand

Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, fi gures and projections have been provided by various sources and have not been verifi ed by us. We have no belief one way or the other in relation to the accuracy of such information, fi gures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, fi gure, calculation or any other information that you rely upon that is contained in the material. © Colliers International 2013.

Fields of opportunity - f.tlcollect.com › fr2 › 813 › 73366 › Rural_and... · RURAL & AGRIBUSINESS Cattle and Lamb Gross Unit Values The Australian weighted average saleyard

Documents