The general manager for strategy behind the $155 million Sustainable Agriculture Fund, Deo de Jesus, says the diversification of the fund's farmland holdings has been a crucial factor in helping it to deliver yet another strong operating profit and rise in land vale.
The fund, backed by Australia's biggest superannuation funds, delivered a half-year net profit of $3.7 million for the six months to December. The result is down from the $4.9 million delivered in the previous corresponding period, but this was due to a longer growing season in which the 2016 winter crop harvest was extended into January this year resulting in some of the profit being held over until the second half of the financial year.
AgCAP, which manages the fund, anticipates full-year results will be as good, if not better, than the previous year.
"The SAF portfolio has been specifically designed to provide the same risk exposure as Australian broadacre benchmark published by the Australian Bureau of Agricultural and Resource Economics and Sciences," Mr de Jesus said, "This benchmark has over 30 years of history delivering returns that are comparable to other asset classes."
The fund, which owns cropping land, dairies and premium King Island beef operations, records returns every quarter and for the four quarters of 2016 delivered a total one-year return of 12.7 per cent before fees and 10.6 per cent after fees for its investors such as AustralianSuper, Australian Catholic Superannuation and Retirement Fund and Auscoal Super.
Chief executive Martin Newnham said the fund was now in the top 25 per cent of returns for all Australian broadacre farms over the past three years.
"With our half-year result we expect to again be in the top 25 per cent for a fourth year in 2017," Mr Newnham said.
"Following a $10 million distribution to investors in September 2016 the fund has quickly restored its cash position highlighting the strong cash generation characteristics of a broadacre portfolio."
The fund also delivered a $5.8 million gain capital growth, primarily from water value increases at Darlington Point, demonstrating the strength of the Murrumbidgee Valley as a cotton and permanent planting region.
The beef cattle farms at the King Island Aggregation performed well, benefiting from favourable weather and high cattle prices.
The fund's North Star Aggregation once again enjoyed a very strong winter crop harvest with high yields and high chickpea prices. However, this was partially offset by low cereal prices.
Cotton at the Darlington Point Aggregation is expected to do reasonably well, but won't be as high as the past two very good growing seasons as the severely wet spring prevented the fund from getting its full program established.
The fund's Western Victoria Aggregation enjoyed a spectacular season with fantastic yields across all the farms.
Finally, the dairy farms at the Cradle Coast Aggregation, while subdued due to low farmgate milk prices, is on track to exceed budget.
