26 January 2023

Insight from: Robbie Sefton

Agriculture in Australia has certainly been kicking goals in recent years and it’s no secret the opportunities for investment in this growing sector have proved attractive for foreign investors, including overseas retirement funds. But, it seems, not so much for domestic funds. It appears the reasons for this are many and varied – and potentially quite complex – but ultimately are both agriculture and Australian super fund members the big losers?

I had the chance to hear from a representative of an Australian super fund recently, who addressed this gap in domestic investment in ag. About $3 trillion is currently held and managed by Australian superannuation funds, so there is no shortage of investment capital, but he says one of the factors restricting fund managers is the current regulatory framework in Australia which encourages a more short-term outlook where risk is minimised, rather than playing a longer game which may include some ups and downs, but ultimately prove profitable for members. Agriculture, by its very nature, obviously has its share of risks – seasonal, trade challenges, input costs etc. – but when things are going well, returns are spectacular. The value of Australian farm production for the past two financial years has exceeded $80 billion. But, with the good, comes the not so good, meaning agricultural investment is certainly a long game.

Other commentators have said agriculture doesn’t necessarily speak the language of investors so isn’t ‘selling’ the vast array of opportunities within the sector as well as it could. On the other hand, too, super funds could look to have more personnel with ag backgrounds as part of their teams.

It’s certainly not that there’s a lack of awareness around the issue. Early last year, the Federal Government accepted a report on superannuation fund investment in Australian agriculture by the House of Representatives Standing Committee on Agriculture and Water Resources, tabled in December 2018. There were a number of factors identified as ‘barriers’ to investment including foreign investment rules and tax; a lack of understanding of the ag sector by fund managers; and ‘the inadequacy of currently available government data relevant to the agricultural sector, its financial performance and investment suitability’. The government of the day noted certain recommendations from the Committee, supported others, and rejected another. What’s next though? Does the government see this as a priority and is there enough political will to start considering some solutions or initiatives to turn the situation around?

There is a lot on the line here and the government saw it as a big enough issue back in 2018 to initiate an actual inquiry. Now, we also have the well-publicised commitment to boost farmgate output to $100 billion by 2030. When there’s so much opportunity – for a multitude of stakeholders – it would seem a travesty to just maintain the status quo. Perhaps there’s a role, too, for super funds to play in a push for change by talking to their members and putting a value proposition to them around agricultural investment? If members appreciate the opportunities – and the risks – but can still see the value in investing in – and supporting – sustainable Australian food and fibre businesses and initiatives, then maybe they start shaping and influencing the overall conversation, and decision-makers have no choice but to listen.

To read this article in The Land Newspaper, go to Agriculture is a long game super funds are reluctant to play, says Robbie Sefton | The Land | NSW