Australian farm debt and equity levels

Farm equity levels in Australia are high by international standards with debt to equity ratios being on a declining trend over the long term. The average level of debt as a percentage of total farm equity (i.e. land value plus the net value of capital stock) of Australian farms has remained below 25% for the last decade (since 2001-02).

Debt as a percentage of total farm equity, 1991-92 to 2010-11

As of 2010-11 total farm debt as a percentage of total farm equity stood at 24%. Total farm debt for the Australian agriculture sector was AU$64 billion against total farm equity of AU$375 billion (being the sum of AU$265 billion of land value and AU$110 billion net capital stock).

References and data sources:

  • Australian Bureau of Statistics, Australian National Accounts, National Income and Expenditure Data Series, 2012
  • Australian Bureau of Statistics, Selected Agricultural Commodities Data Series, 2012
  • Australian Government Department of Agriculture, Fisheries and Forestry, Australian Bureau of Agricultural and Resource Economics and Sciences, Agricultural Commodities Statistics, 2012

Investment returns

Farming is like any other business: all other things being equal, income is dictated by the quality of the management team. Even enterprises with similar soil, climate and business model can show a high degree of variance. This means tenant / manager selection is a critical component of the agricultural investment process.

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Investment style

Inefficiencies in the farmland pricing mechanism are one of least exploited opportunities to increase returns as a farmland investor. When it comes to buying agricultural assets, we are able to help our clients beat the market because of our unconventional approach to acquiring farms and the information advantage we have in the markets in which we specialise.

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Investing in Australian agriculture

Australia’s robust economy, strategic location and investment friendly business environment have made the country one of the world’s top destinations for foreign investment, with FDI inflows of over twice the OECD average (% of GDP basis, 2011).

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Geographic and sector focus

For investors, the choice of agricultural sector will be driven by your risk tolerance and overall investment objectives. As a general rule, arable agriculture (i.e. the cultivation of annual crops, in particular grain) is the least volatile farming sector.

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