THE latest acquisition of major agricultural investor Rural Funds Management Ltd (RFM), the manager of Australian Securities Exchange-listed Rural Funds Group, is planned to be 5409 hectares of sugar cane farms in Queensland.
The offering includes 8060 megalitres of water entitlements, as well as associated plant and equipment from MSF Sugar Pty Ltd for $81.1 million (excluding transaction costs).
RFM intends to progressively convert the farms to about 2200ha of macadamia orchards, with a substantial portion of the remaining area able to be used for cropping.
This purchase will give RFM the opportunity to grow its rather modest macadamia portfolio, which measures 259ha across three orchards at Bundaberg in central Queensland, with two more sites under development.
As at June 30, 2019, RFM's Bundaberg macadamia properties were valued at $14.4m.
The fund manager is in discussions with several potential lessees with further details of the agreed development program to be announced in due course.
About 25 per cent of the MSF farms are leased at rates consistent with RFM's other natural resource predominant assets.
ASX documents revealed that RFM intends to seek to lease the balance of the cane farms which are currently operated.
The transaction includes a two-year off-take agreement in respect to the cane produced on the farms, or a reduction in the purchase price.
Settlement is anticipated to occur in October 2020.
The price of macadamias has soared by 49pc from 2013 and 2019, as global demand has gone 'nuts', with 70pc of Australia's crop being exported.
While the macadamia industry only makes up a small part of Australia's agricultural sectors, the country is one of the world's largest producers of the nut.
The boom has seen several sugar cane properties in the Eastern States sold with the intention to convert and grow macadamias.
Majority are grown in Queensland (54pc) and New South Wales (46pc), with WA making up less than 1pc of production.
Nuts make up 40pc of Australia's horticultural exports (valued at $1 billion), with macadamias making up 20pc ($200m) of that.
Macadamias are the only native Australian crop to ever be developed and traded internationally as a commercial food product.
RMF already owns two cotton properties in Queensland, as well as having other assets across Australia in cattle, almonds, poultry, vineyards and macadamias.
RFM's last purchases were in October 2019 of the Petro feedlot with a major water licence at Eneabba and the Wilara and High Hill properties at Jurien Bay from WA businessman Brent Smoothy for $22.6m.
In December 2019 RFM offloaded its poultry assets to ProTen Investment Management Pty Ltd for $72m.