Investors promised up to 16% from dairy farming
Based in Hamburg, Aquila Capital is one of Europe’s leading independent alternative asset managers, but looks to the other side of the world for the best dairying returns on investment.
Aquila’s experts believe the best opportunities for investors over the next decade lie in farms in OECD/ investment grade countries with secure land titles. Andrew Sliper, senior manager farm investments at Aquila, pinpoints parts of Tasmania and Victoria, with their relatively favourable and predictable climates, as the most lucrative dairying areas — even though he is a New Zealander.
A report prepared by the company last December said 28% of institutional investors want to increase their exposure to agricultural land in 2014.
However, Aquila is directing them away from the EU, and their head of farm investment, Detlef Schoen, is apparently not tempted by the sale of the UK’s 39,533 acres of farmland by the Co-Operative Group.
The reason given is that EU subsidies have been capitalised into land prices, and growth in farmland prices will depend on these subsid ies lasting into the future. The opposite trend is more likely, with 13% to be cut from the CAP budget between 2014 and 2020.
In contrast, growth in New Zealand dairy farm prices has supported a rate of return from Aquila’s agricultural investments there of 14%. Aquila says it has directed €360m raised since 2007 primarily at New Zealand farming, and now looks to Australia to invest a fresh capital raise from institutions of up to €290m.
With a 1,284-hectare dairy unit recently selling for about €40m in Canterbury, in the South Island, Aquila now turns its attention to Australia for better land value, plus major production of grain at relatively favourable prices, offering good prospects for feed supplies, and political stability.
Australian dairy currently offers the highest risk-adjusted return of any sector in global agriculture, according to Aquila.
They expect rates of return of 11%-16% per annum.
