Investment in Australian Agriculture Drying Up

Investment banker and chief executive and founder of Kidder Williams, David Williams in his Melbourne office.

The party is over and those mouthing “nine billion to feed by 2050” look like dinosaurs.

The wall of money from countries we have rarely seen before to invest in Australian food and agriculture is slowing. Some money came from family offices and pension funds escaping the crisis in the eurozone. Some of it was chasing the new understanding of the growth prospects in food to feed the growing middle class in Asia. And some came from North American pension funds and universities chasing low-risk horticulture.

Australia is attractive to all as we produce high quality product, have reliable infrastructure and low sovereign risk. Interest in our assets and our products will to continue but at a much slower pace as alternatives in South America, Asia and Eastern Europe sometimes don’t offer these qualities in one package.

There have been hiccups along the way with respect to government policy on foreign investment. But now the gravy train is slowing. Some of this is because it is getting harder to get money out of China and other countries and some because it is getting harder to get money to Australia. Investors who did come have fully invested and gone home, probably never to return for 10 years.

Demand for food processing assets has also been strong from foreign trade buyers, and from foreign and domestic PE firms. That has also slowed to a trickle with fewer buyers. A number of businesses bought in recent years for heady prices are now coming back on the market

and will be sold at discounts. There will be lots of opportunities for Australian trade buyers previously outbid.

Water continue to put uncertainty on cotton, nuts, horticulture and dairy. Recent fish kills exacerbate the situation by pressuring for more environmental flows. This will force water prices up and push horticulture to new regions and new types of crop.

While all this sounds pessimistic, if we pull our heads out of the China clouds there is an exciting future and much to do in all food companies. If I were preparing the board pack for a food company for next week, my agenda might look like this:

  • How can we improve our and our farmer suppliers’ water efficiency by adopting technologies, to lessen our reliance, improve our yield or change government policy?
  • What opportunities are there for us if UK leaves the EU without a deal and reverts to “most favoured nation tariffs”?
  • How are we reacting in our product development to the blurring of traditional meal times by snacking throughout the day?
  • We can’t wait around for large acquisitions and the old innovation model is not working, so what can we do to invest in start-ups to get new products to market quickly and more often?
  • What are we doing in our product development in ‘‘gut health’’ and the crossover between food, nutraceuticals, pharmaceuticals and personalised foods, that match DNA?
  • How can we turn our off-spec products, by-products and waste into valuable products?
  • How can we go direct to consumer with our products and change our logistics model?