'Perfect storm' beefs up farm deals

01 Jun, 2015 05:50 AM
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3
 
To have all these things aligning - it's very, very rare

AN AREA twice as big as Texas is in drought in eastern Australia, yet realtors say there's rarely been a better time to buy Aussie farmland.

The reason is beef. Exports are at record levels and cattle prices in the east of Australia reached an all-time high this month.

Prices of farms are at a 10-year low, at less than $500 a hectare, according to Herron Todd White, Australia's largest independent property appraiser. At the same time, US demand for beef has pushed cattle prices to a record, and a weaker Australian currency has made outback farmland cheaper for overseas investors.

"It's a buyer's market, there's no doubt about that," said Tim Lane, rural director with Herron Todd White in Brisbane. "To have all these things aligning - it's very, very rare."

Among 16 key international markets for agricultural land, only Uganda and Mozambique were cheaper than Australia, Savills Plc, Britain's largest real-estate agency, said in a report last year.

Farms in Australia returned more than 15 per cent a year in the decade through 2012, Savills found. That's more than double the average return from Australia's benchmark stock index over the same period.

Australian real estate is increasingly attractive in Asia, said Rawdon Briggs, director of rural and agribusiness transaction services with Colliers International Property Consultants in Brisbane. He said he met with prospective investors in Shanghai in March and will be marketing Australian properties in Beijing, Guangzhou and Shenzhen in July and August. "You concentrate on where the capital's coming from," Mr Briggs said. "We're seeing a significant upswing in interest."

Australia is the world's largest wool exporter and is one of the top five suppliers of beef, cotton, sugar and wheat. In Queensland, Australia's biggest cattle-farming state, Chinese investments jumped by almost half in the year ended June 2014, according to the state government.

Purchases totaling $463 million made China the biggest overseas buyer and were helped by a 19 per cent drop over the past two years in the Australian dollar against the yuan. The Aussie has fallen 20 per cent against the US dollar and slipped about 6 per cent against the euro.

The same currency fluctuations are supporting overseas demand for Australian beef. Exports are at record levels and cattle prices in the east of Australia reached an all-time high this month. There's little sign that will change any time soon. Already, more than 70 per cent of beef produced in Australia ends up overseas. Free trade agreements struck by Australia with Japan, South Korea and China since 2014 have lowered or scrapped tariffs on beef exports, helping sales abroad.

"That demand is likely to remain in place at least for the next 12 to 18 months," said Ben Thomas, manager of market information at Meat and Livestock Australia in Sydney. "That paints a promising picture for prices."

Long-term investors are looking past the current dry spell, said Tony Lovell, co-founder of asset manager SLM Partners (Australia), which is raising capital to buy more farms.

"We are seeing them 'warts and all'," said Mr Lovell, adding that he's in talks with an Asian insurance group and three pension funds from Britain and Europe to lift the company's $105 million SLM Australia Livestock Fund.

Though drought will erode profits in the short term, it may present good buying opportunities by forcing distressed properties on to the market, said David Hassum, a director and rural specialist at Brisbane-based InterFinancial Corporate Finance.

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READER COMMENTS

THE FARMER
1/06/2015 7:41:27 AM

With real estate people it all ways the best time to buy even when its not .Its certainly not a great time to stock a station & El droughts can go on for years .What then ?
Andre Latigan
1/06/2015 4:42:23 PM

Fantastic but only if stock can graze on money during drought.
Peter Honnef
1/06/2015 7:51:41 PM

I'd like to see the figures behind the 15% per annum return achieved by Australian farms. Unqualified statements that could be construed as investment advise and motivate acquisitions might be a bit risky!!!

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