Navigating the Future: Seizing International Opportunities in Australian Agriculture for APAC Investors

Clinton Peake, Wen-Shien Chai

14 February 2024

In the volatile geopolitical landscape, the Australian agriculture sector emerges as an opportunity, especially for Asia-Pacific (APAC) investors. Delving into this sector necessitates a deep comprehension of Environmental, Social, and Governance (ESG) principles, pivotal in today's discerning investment landscape.

The Australian Agricultural Landscape: A Hidden Gem

Australia's agricultural sector covers approximately 427 million hectares of land (excluding timber production), and is diverse in its climate, ranging from tropical rainfall to more arid conditions. Australia grows a wide variety of intensive and broadacre crops and livestock under clear blue skies. Significantly, it is at the forefront of sustainable practices; for instance, cotton growers have made great strides in improving irrigation water use in the past decades and fodder additives to reduce methane will be mass adopted once regulatory authorities clarify the rules of the game.

ESG: The Heart of Investment Decisions

For APAC investors, an ESG-centric approach is both ethical, and a strategic imperative. The double dividend zone of investing in natural capital which is good for the producer and good for the general populace is well underway. Investments mindful of environmental impacts, social responsibility, and robust governance demonstrate holistic sustainability and above average return prospects. The beauty of agricultural assets is their scope to provide positive environmental impacts through land access for carbon capture or renewable energy production, and the regenerative agricultural practices of their custodians, which are not new concepts to the Australian agricultural sector. Many producers have been doing this multi generationally. The consumer and regulators are now becoming more aware of the job being done. Being ingrained, this approach will not sway with the populist political discourse, rather the steadfast commitment to sustainability will endure.

Opportunities for APAC Investors

Diversification and Stability
Production from the Australian agriculture sector contributes significantly to the nation's economy, accounting for 11.6% of goods and services exports in 2021-22, 2.4% of value added to GDP and 2.5% of employment. For APAC investors, the hidden benefit is the capital growth story which has returned upwards of 7% year on year for over 30 years. Agriculture land and business represent a unique opportunity to diversify portfolios into a counter cyclical sector that exhibits resilience against economic fluctuations and is crucial for global food security. Where fossil fuel energy has seen replacement opportunities emerge and developed into real infrastructure, the food and fibre products derived from agricultural businesses are not so quick to be superseded.

Innovation and Technology Supporting other industries
Australian agri businesses form an outstanding platform for ongoing R&D. Investment in Australian agri-tech allows access to advanced technologies. For example, Australia remains one of the only countries in the world without BSE, making by-products of the beef industry suitable for research and development into human-grade medical solutions such as mesh and heart patches.

Partnerships and Collaboration
Collaborations between APAC investors and Australian firms can drive innovation. For instance, the Australia-China Agricultural Cooperation Agreement (ACACA) has facilitated numerous joint ventures, enhancing agricultural productivity and technology exchange. Meaningful partnerships of this nature help communities see past the jaw boning that often happens in political circles as pressure is exerted for domestic political purposes much of the time.

Australia is Asia ready. Local businesses who have specialist skills and Asia-relevant capabilities are ready to help APAC businesses make the most of these opportunities.

Navigating Challenges

Despite the abundant opportunities, risks and challenges are a constant in the investing space. Understanding Australia's stringent environmental regulations and relatively small domestic market dynamics are critical. The Australian government’s Foreign Investment Review Board (FIRB) plays a significant role in overseeing capital and how it is deployed, ensuring they align with national interests.

For APAC investors, the Australian agriculture sector offers fertile ground for growth, innovation, and sustainable returns both production and capital growth exceeding inflation over the longer term. By aligning investments with ESG principles and leveraging Australia's agricultural prowess, investors can yield substantial benefits while contributing to a sustainable global future.

The Australian agriculture sector awaits, teeming with opportunities for the discerning APAC investor. Embrace this moment to invest in a sector that promises not only financial returns but also a sustainable future for our planet.

agribusiness Asia Desk

A strategic Outlook