Here’s why your super is not invested in Aussie farms
Farming life might look attractive but don't bet your retirement on it. Photo: Getty
When it comes to icons of Australian life, there’s nothing quite like the place the agricultural sector holds in our collective psyche.
While we’ve been one of the world’s most urbanised societies for the best part of 170 years, images of The Man from Snowy River, a Kelpie on the back of a ute, Akubra hats and RM Williams boots have deep resonance for many who have never even stepped on a cow pat.
But when it comes to our collective investments, our money doesn’t flow with the national sentiment. David Williams, principal of investment bank Kidder Williams and a specialist on rural investment, says “Australian super funds have hardly any investments in the rural sector”.
It’s a sore point with rural politicians. Nationals leader and Deputy Prime Minister Barnaby Joyce raised it this week. “It is infuriating!” he told the Australian Financial Review.
“They turn up with their elastic-sided boots and the right belt but that’s as far as they get when it comes to agriculture.
“There are farmers who are making very good money – the smart money has moved in with Gina Rinehart, Andrew Forrest, Kerry Stokes and overseas pension funds but the people walking down Pitt Street and Collins Street are missing out.”
Australian agriculture has been a magnet for some foreign pension funds with as much as $2 billion invested in recent years. Canada’s Public Sector Pension Investment Board are expected to buy into irrigated agricultural group Webster, chaired by infrastructure veteran Chris Corrigan and holding $300 million worth of water rights alone.
As the following table shows, foreign pension funds have already sunk big money into cattle and some big international hitters have joined the party.
But Australian superannuation funds are noticeable for their absence from agricultural investments. The industry funds sector has minimal exposure and the retail sector likewise.
AMP, one of Australia’s largest for-profit superannuation investors, once owned a major cattle group, Stanbroke Pastoral, but sold out last decade.
David Williams said a lot of foreign, particularly Chinese, investors have different needs from Australian institutions.
“They have very low costs of capital and they know how to market into China. Also, many of them have only seen the good times with the China boom,” Mr Williams said.
“Australians have a glass half full full attitude, rightly in my view. Profits on Australian agricultural businesses are around 3 to 5 per cent and if you add in capital gains it might be 7 or 8 per cent.
“But those gains are so very volatile because of price fluctuations and weather variability.”
Also, bidding from cashed up foreign investors has pushed up land prices, making farm investments less attractive. “Yields have fallen to about 6 per cent and you can earn those returns elsewhere with less risks.”
However, there are Australian agricultural assets that would suit superannuation investors, Mr Williams said. “Water rights [which Kidder Williams holds] earn 8 to 8.5 per cent a year.”
A spokesman for Industry Super Australia said: “The returns simply don’t stack up. There are too many variables.”