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Tag: worth
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Index takes guesswork out of buying a farm
OpinionTalking Point: New index will take the guesswork out of buying farm businesses
JAN DAVIS, MercuryWE’VE been hearing a lot lately about growing interest in Australian farm land. The proof of the pudding is always in the eating – and the fact that many wallets have been opening demonstrates that buyers are recognising the value inherent in well-performing agribusinesses.
Management consulting company BDO has been looking at the key investor groups which have a particular focus on Australia’s food and agribusiness industry. They’ve identified that there are several different groups in the market – all with slightly different motivators.
Trade buyers always have an eye for a strategic purchase. Australian farmers have been buying out their neighbours to create larger-scale enterprises. Indeed, over the 30-year period to 2011, there was a 40 per cent decline in the number of Australian farm businesses, while area farmed actually increased.
Institutional investors, such as super funds, have been slow to recognise the value in agribusiness. However, in the current investment environment, the returns offered by agriculture are increasingly compelling. This is particularly so when taking into account the key drivers of food security, the growing middle class in Asia and changing diets.
High net-worth individuals are also buying the agricultural investment story – literally! Cases in point include London billionaire Joe Lewis taking control of AACo, and Gina Rinehart’s bid for Kidman.
And then there’s the Asian buyers, whose interest in Australian agriculture is primarily motivated by strong commercial fundamentals and opportunities for growth.
Until recently, investors across all these sectors have had to rely on patchy information and their own research to determine value when considering purchase of agribusinesses. With farms, a key guide has been the underpinning land value. As we saw last week, that has delivered solid returns over many years.
But how can a potential investor assess the worth of a business beyond land value?
One of the factors that has limited wider investors interest has been the difficulty in getting access to reliable, timely and relevant information on how the sector performs on basic business measures; and how performance compares to other possible investments.
Well, that’s all about to change.
The Australian Farmland Property Index was launched recently at the Australian Farm Institute Roundtable Conference.
For the first time in the history of Australian agriculture, investors will have available a regularly updated Index which provides a measure of the investment returns being generated by the sector. This will enable investors to compare the sector’s performance against that of other asset classes.
The Index is based on the National Council of Real Estate Investment Fiduciaries (NCREIF) index which has been available for North American agricultural investors since 1990. From a starting base of US$350 million, the NCREIF index now reports US$7.8 billion from 729 properties. It also provides the Timberland index which reports on assets valued at US$24.2 billion.
The index will use the same basic methodology as that used for the US, but with some small tweaks to reflect differences in the Australian agriculture sector.
In the initial stages, it will be based on a portfolio of corporate farms that together total more than A$827 million in total asset value. The quarterly performance of these businesses is then aggregated into a single index. Of course, there are strict rules around participation in order to preserve the confidentiality of those participating.
The baseline index has been calculated for the financial year ending 30 June 2016. It shows an impressive average return of 23.9 per cent across the portfolio. This figure was made up of an 8.3 per cent increase in income; and 14.6 per cent from capital appreciation.
Over time, the number of participants is expected to increase. This will enable provision of more detail across different locations. It may also provide other data, for example the returns from buying and leasing farms to Australian farmers to manage as compared with returns achieved by investors who choose to manage their own properties.
In launching the Index, the Executive Director of the Australian Farm Institute, Mick Keogh, said that the institute is supportive of the Index “as it will provide and indicator of the performance of the Australian agricultural sector on a regular basis, and will help and encourage investors to include the sector as an important component of a balanced investment portfolio.”
This is an important development for the agribusiness sector. The more information business owners and investors have, the better positioned they are to be drive increased efficiencies and be competitive in an increasingly benchmark global market place.
On – 29 Nov, 2016 By JAN DAVIS
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Index takes guesswork out of buying a farm
OpinionTalking Point: New index will take the guesswork out of buying farm businesses
JAN DAVIS, MercuryWE’VE been hearing a lot lately about growing interest in Australian farm land. The proof of the pudding is always in the eating – and the fact that many wallets have been opening demonstrates that buyers are recognising the value inherent in well-performing agribusinesses.
Management consulting company BDO has been looking at the key investor groups which have a particular focus on Australia’s food and agribusiness industry. They’ve identified that there are several different groups in the market – all with slightly different motivators.
Trade buyers always have an eye for a strategic purchase. Australian farmers have been buying out their neighbours to create larger-scale enterprises. Indeed, over the 30-year period to 2011, there was a 40 per cent decline in the number of Australian farm businesses, while area farmed actually increased.
Institutional investors, such as super funds, have been slow to recognise the value in agribusiness. However, in the current investment environment, the returns offered by agriculture are increasingly compelling. This is particularly so when taking into account the key drivers of food security, the growing middle class in Asia and changing diets.
High net-worth individuals are also buying the agricultural investment story – literally! Cases in point include London billionaire Joe Lewis taking control of AACo, and Gina Rinehart’s bid for Kidman.
And then there’s the Asian buyers, whose interest in Australian agriculture is primarily motivated by strong commercial fundamentals and opportunities for growth.
Until recently, investors across all these sectors have had to rely on patchy information and their own research to determine value when considering purchase of agribusinesses. With farms, a key guide has been the underpinning land value. As we saw last week, that has delivered solid returns over many years.
But how can a potential investor assess the worth of a business beyond land value?
One of the factors that has limited wider investors interest has been the difficulty in getting access to reliable, timely and relevant information on how the sector performs on basic business measures; and how performance compares to other possible investments.
Well, that’s all about to change.
The Australian Farmland Property Index was launched recently at the Australian Farm Institute Roundtable Conference.
For the first time in the history of Australian agriculture, investors will have available a regularly updated Index which provides a measure of the investment returns being generated by the sector. This will enable investors to compare the sector’s performance against that of other asset classes.
The Index is based on the National Council of Real Estate Investment Fiduciaries (NCREIF) index which has been available for North American agricultural investors since 1990. From a starting base of US$350 million, the NCREIF index now reports US$7.8 billion from 729 properties. It also provides the Timberland index which reports on assets valued at US$24.2 billion.
The index will use the same basic methodology as that used for the US, but with some small tweaks to reflect differences in the Australian agriculture sector.
In the initial stages, it will be based on a portfolio of corporate farms that together total more than A$827 million in total asset value. The quarterly performance of these businesses is then aggregated into a single index. Of course, there are strict rules around participation in order to preserve the confidentiality of those participating.
The baseline index has been calculated for the financial year ending 30 June 2016. It shows an impressive average return of 23.9 per cent across the portfolio. This figure was made up of an 8.3 per cent increase in income; and 14.6 per cent from capital appreciation.
Over time, the number of participants is expected to increase. This will enable provision of more detail across different locations. It may also provide other data, for example the returns from buying and leasing farms to Australian farmers to manage as compared with returns achieved by investors who choose to manage their own properties.
In launching the Index, the Executive Director of the Australian Farm Institute, Mick Keogh, said that the institute is supportive of the Index “as it will provide and indicator of the performance of the Australian agricultural sector on a regular basis, and will help and encourage investors to include the sector as an important component of a balanced investment portfolio.”
This is an important development for the agribusiness sector. The more information business owners and investors have, the better positioned they are to be drive increased efficiencies and be competitive in an increasingly benchmark global market place.
On – 29 Nov, 2016 By JAN DAVIS
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Take a look at America’s vegetable garden, home to $5 billion worth of crops | PennLive.com
Days in the 60s and 70s, and nights in the 50s, all year long…
Rich, black, crumbly, well drained soil…
No winter freezes or brutal summer heat waves…
Plenty of fresh, clean water.
It’s the stuff of a gardener’s dream – the conditions that we clay-infested, erratic-weather-stressed central-Pennsylvania gardeners don’t have.
But there is a place where this plant nirvana exists.
It’s called Salinas Valley, Calif., and the people living there have had the good sense (so far) to exploit most of the acreage for astounding vegetable production.
This 90-mile stretch of Pacific Ocean coastline, about 2 hours south of San Francisco, produces a whopping 50 to 90 percent of many of America’s most-eaten vegetables.
Monterey County, where the Salinas Valley is located, churned out nearly 5 billion dollars worth of crops last year, making it the top-producing agriculture county anywhere in the world.
It’s where America gets the majority of its leaf and head lettuce, strawberries, broccoli, cauliflower, celery, spinach, artichokes, cabbage, and peas.
In short, it’s America’s vegetable garden.
See video of workers harvesting broccoli in California’s Salinas Valley:
Without it, we’d be hurting at the produce section – especially from winter through mid-spring.
This part of the central California coast specializes in cool-season crops, ones we have to cram into that narrow window between winter-frozen soil and early-summer heat.
But in the land of eternal pleasantry, crops such as lettuce, broccoli, spinach and celery can be grown all year. One crop follows another.
Fields of veggies sprawl like oceans of green for mile after mile – a football field of cabbage, then lettuce, then spinach, then cauliflower, then more lettuce, and on and on and on.
The only brown you’ll see are blocks just harvested and getting ready to receive the next crop.
“The goal is three crops per field per year,” says Evan Oakes, a Monterey County Extension educator.
Mountains flanking both sides of the Salinas Valley essentially make the area a huge walled-in vegetable garden.What makes that possible is the fortunate geography of the Salinas Valley. Mountains flank both sides of the valley, which opens up into the cool waters of the Pacific at its northern mouth.
The moist, moderating Pacific air funnels into the valley, which is essentially a nature-made walled garden.
“It never gets hot here,” says Oakes. “We can have days about 80 degrees and nights about 50 degrees for nine months of the year. Winter rarely drops below 40.”
Read George’s post on “What If We Didn’t Have Such Wild Weather Rides?”
The soil is also magnificent.
“There’s such amazing soil here that we don’t have to use much fertilizer,” Oakes says. “It’s so fertile. Topsoils are close to 100 feet deep in a river valley like this.”
The third key ingredient is water. That one is a little dicier since a single head of lettuce takes more than 3 gallons to grow and a crown of broccoli takes 51/2 gallons.
Monterey County gets only about 15 to 20 inches of rain per year, and most of that falls in the winter. Twelve inches of rain a year or less qualifies as a desert.
That forces Salinas growers to tap underground water and rely almost solely on irrigation to water the plants.
But the Salinas Valley is blessed again there with the Salinas River. Although 90 percent of it is underground, wells start hitting plentiful, clean supplies just 5 to 6 feet down.
The neighboring Carmel Valley with its Carmel River isn’t as fortunate. That source has been sucked down to the point where there’s now a moratorium on new wells.
Getting the crops from field to our tables is done with military-logistics efficiency.
Workers are harvesting broccoli in this Salinas Valley field.Some crops, such as spinach, lettuce and broccoli, are harvested with a combination of machines and people. Others, such as strawberries, asparagus and artichokes, are harvested by knife-wielding workers who bend over for 8 hours a day, 6 days a week.
It’s hard work, and few Americans are interested in doing it despite the pleasant weather and pay that can approach $20 an hour (plus full benefits).
Almost all of the labor is Mexican.
“This is the first time in our history where we’re having trouble getting enough labor,” says Oakes. “The Latino people are scared to death about coming over the border.”
He says companies typically find American workers do one day and decide that’s enough.
Assuming enough hands are on deck when a crop is ready, most veggies are picked and packed right in the field.
Those boxed strawberries you bought, for example, were touched only once before you opened them – by the picker/packer.
Lettuce and other small greens are the exception. They’re washed three times in chlorinated water before being packed.
“The goal is to pick the crop, pack it by hand in the field, get it to a cooler within an hour or two, and get it on the road,” says Oakes.
Cooling facilities throughout the valley are able to cool picked produce down to 33 degrees in as little as a half-hour. Refrigerated trucks line up outside these plants to haul it throughout the United States as fast as it can be boxed.
Besides cool-season veggies and strawberries, the Salinas Valley produces more than 44 million pounds of mushrooms a year, grows nearly 67,000 acres of assorted organic crops and 44,000 acres of wine grapes a year, and is California’s second-biggest producer of flowers, ornamental plants, and potted plants.
The variety is astounding, mainly because pretty much everything is happy growing in the Salinas Valley.
“When you have water, good soil and this climate, you can go crazy,” says Oakes.
See George’s photo gallery of 38 pictures from California’s central coast and valleys
http://www.pennlive.com/gardening/2017/06/americas_vegetable_garden.html
On – 15 Jun, 2017 By George Weigel
