Time to consider an investment in Australian Agriculture?

20 September 2020

Investment portfolios typically have minimal exposure to agriculture and the primary production of food. This is likely not helped by the fact that the benchmark S&P/ASX 200 equity index has less than 1% exposure to agricultural companies and many of these have limited investments in agricultural real-assets.

Australia is an important part of the global food supply chain. With the world’s fastest growing population, Asia, on our doorstep, rising global consumption and good export channels to the rest of the world, the demand for our food is rising. Australia is recognised for its clean, green and high-quality agricultural products, complementary seasons to Europe and North America for many products, free-trade and market access agreements with many important trade partners.

The predicted growth in food demand over the coming decades creates significant opportunities for Australian agriculture. The local industry is in a strong position to meet this rising demand and Australia has a comparative advantage in both the production of many agricultural products and our proximity to key markets.

Like many markets, agricultural prices vary between years and cycles – largely reflecting supply-demand economics. However, underlying demand for agricultural real-assets and food products continues to grow and this trend is likely to remain for years ahead.

In addition to the solid long-term or “secular” demand outlook for agriculture, there are other compelling reasons for investors to consider agricultural exposure as part of a well-diversified investment portfolio.

Irrespective of short-term commodity price movements, investing in Australian agriculture offers investors:

  • Competitive risk-adjusted returns
  • A lower level of volatility
  • Returns uncorrelated to other traditional asset classes; and
  • Defensive characteristics in certain market cycles.

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Adrian Goonan, Head Of Cropping And Diversified Agriculture & Steve Jarrott, Portfolio Manager, Diversified Agriculture

Adrian Goonan, Head Of Cropping And Diversified Agriculture & Steve Jarrott, Portfolio Manager, Diversified Agriculture