Australian Farmland Index to measure corporate farm performance

The Weekly Times - Peter Hemphill

Valuable tool: The Australian Farmland Index will allow institutional investors and superannuation funds to judge the performance of agriculture against other asset classes.

The Australian Farmland Index, to be launched at the Australian Farm Institute’s annual forum in Brisbane next week, will give high-end investors such as superannuation funds a means of comparing agricultural investments with other classes of assets.

The index was developed by financial adviser Frank Delahunty, who had been working on the concept for three-and-a-half years.

Mr Delahunty said the concept was based on the National Council of Real Estate Investment Fiduciaries farm index in the US, which had been in operation since 1990.

Mr Delahunty said the financial data would come from 48 high-value farms on the east coast of Australia with a total value of $827 million.

He was hoping to begin with farms with a total asset value of $1.2-$1.5 billion but believed more farm managers would quickly sign up to the program once it was operating.

He said when NCREIF began in 1990, the total asset value of the US farms was $US350 million ($456 million).

Now that was worth $US7.8 billion ($10.2 billion) from 729 properties.

“That’s grown very substantially in the past two or three years, as more institutions have focused on investing in agriculture,” he said.

Mr Delahunty said NCREIF would analyse the Australian farm financial data and compile the index based on its methodology.

He said the index would be published quarterly.

 

He hoped that eventually, as more farming units provided data, the index could be broken down into types of properties or regions.

“This will be the first time NCREIF will put together an index outside the US,” he said.

Mr Delahunty said potential users of the index included superannuation funds, banks, universities and property valuers.

He said it would be valuable to institutional investors such as superannuation funds.

“It’s going to give farm investments a basis of being evaluated against other asset classes, which have all got benchmarks,” he said.

“It’s a tool for analysts to judge how farms are performing.”

First State Super head of fixed income and real assets Damien Webb said his superannuation fund was encouraged by the development of the Australian Farmland Index.

“It will help bring transparency to the performance of the sector that is currently not available,” Mr Webb said.

AFI executive director Mick Keogh said the index would encourage investors to include agriculture as part of a balanced investment portfolio.

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