attracting capital to agriculture

CHALLENGES & OPPORTUNITIES!

Attracting Capital to Agriculture

Agenda

Agriculture’s historical performanceThe coming Global Food CrisisPresent issues with global capital marketsAttracting capital – why, who and howChallenges of attracting capitalPossible solutions

Agriculture’s Historical Performance

Source ABARE & Cornish Consultancy

30 Years 15 years 10 Years 5 YearsAust Property

11.8% 8.1% 6.3% -2.9%

Aust Shares

12.6% 10.5% 8.4% 6.8%

Aust Bonds 10.5% 7.4% 6.4% 6.0%Intl Shares 12.4% 5.1% -3.3% -0.9%Cash 9.4% 5.7% 5.6% 5.8%Ag Top 25%

10.7% 10.7% 11.8% 8.0%

Agriculture Performance Ranked

4/6 1/6 1/6 1/6

Risk/Return per Asset Class 1980-2010

Source: Cornish Consultancy

Agriculture’s Historical Performance

Ag has been a good investment, particularly over past 10 years

Less volatility than other investments? Increased commodity prices?Expectations for the future – the “new

normal” (PIMCO)

Price Predictions– Where Will We Go?

DJII – Is the Equity Bullmarket Over?

Global Food Crisis

Global Food Crisis

Emerging demand in China, India and SE Asia

Constraints on water, land, fertiliser and supply shocks

Biofuels and agriculture’s increasing correlation with energy prices

Rapid $US depreciationInvestment funds and behavioural impacts

Global Capital Markets

Sovereign Debt Issues (Europe and USA)Currency debasementVolatile stock marketsBull market in US Treasury’sWhere do you invest money?Looking for emerging markets and

alternative asset classes?

Attracting Capital

Why do you want to do it? What is your exit strategy?

Who are you going to ask to invest?How are you going to do it?

Types of Capital

Bank debtShared Crop Equity (AACL)Individual InvestorsPrivate EquitySuperannuation FundsSovereign Wealth FundsInitial Public Offering (IPO) on the

sharemarket

Challenges of Attracting Equity Capital

Size of investment & relevanceExit strategyVolatility of earningsStrength of cashflowWhich industriesGeographic diversity

Challenges of Attracting Equity Capital

Management capability and accountabilityCorporate governance and reportingStructure – separate land from operationsLack of understanding of agricultural

investmentLack of investment grade product and track

recordRISK!!

Performance of Corporate Agriculture

Australian performance has largely been poorGood at raising capital, not so good at

managing farmsListed companies rarely trade above NTAFamily farms have more competitive cost

baseHuman resource issuesDo they just want to own land and lease it

out?

Solutions

Need to overcome challenges mentioned previously

Structured products that are easily bought/sold

Pooled investments between family farmersFinding HNW individuals to invest withOfftake agreements with SWF

Solutions

Funds interested in green energy or biodiversity?

People that can manage large businessesEducation about agriculture for the

investment communityNeed to combine best aspects of family farms

with corporate money.

Deja Vu all over again?

Thankyou