Tuesday 9th January 2018
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MyFarm Investments, New Zealand's largest rural investment syndicator, is moving its focus away from its dairy farming origins and expects future growth to come from smaller overlooked investments such as fruit.
The rural investment firm was set up in 1990, initially investing in dairy farms which it syndicated to investors. It has since diversified into sheep and beef farms, horticulture and mussel farming and has more than $500 million of rural assets under management. About half its assets are dairy farms, with some 30 percent in sheep and beef farms and 20 percent in other investments, and the company expects its dairy investments to shrink as farms are sold when investments mature while the proportion in other areas grows.
"Our firm has been around in the investment space primarily focused on pastoral for 20-odd years and we obviously rode the dairy boom through the mid-2000s and through to 2013/14 and we still love dairy but it’s hard to make an investment case for dairy at the moment," chief executive Andrew Watters said, noting the industry had "some headwinds" with debt, tighter requirements around the environment, animal welfare, and health and safety, a variable milk price, and uncertainty around future capital gains.
Watters said while pastoral farm investments were expected to produce a cash return of 4-5 percent, horticulture was achieving between 7-15 percent.
"It's hard to make a case to invest in new dairy farms," he said, whereas in horticulture "we are getting cash profits which are significantly higher than we are able to get out of pastoral."
While he is a dairy farm owner himself, Watters said MyFarm has moved outside its core skill set into permanent crops like kiwifruit, pipfruit, viticulture and other types of food production such as mussel farming where it stepped back from day-to-day management and instead partnered with good operators in each sector.
He said productivity had improved in horticulture with new planting and management systems, and protection around plant variety rights.
"Industries are moving beyond commodity production, so good varieties are produced that customers want, the supply is controlled, and the product is marketed."
Watters said the company was eyeing new investments in previously overlooked industries which were relatively small but fast growing. While he declined to cite specific investments the company was looking at, he name-checked growth areas such as avocados, blueberries, and cherries among areas that hadn't had scale and structure around exporting or processing but where New Zealand produced high-quality seasonal products that customers wanted and were prepared to pay a good price for.
"There's quite a bit to look at and be excited about," Watters said. "Anything to do with food production where we think there is a sustainable competitive advantage and there is good cash returns we will look at."
Later this year, MyFarm will embark on the second stage of its mussel farming project, and it expects to have a crack at Manuka honey, he said.
Watters said MyFarm sees plenty of opportunities for investment in New Zealand and is seeing increased demand from US investors.
Its recent investment syndicate in the Rockit apple industry attracted 67 investors with an average investment of $195,000 and Watters said investors were typically aged in their 50s, 60s or 70s and looking for diversification into real assets to balance out their portfolios. While less liquid than shares, trading in the syndicates is offered through syndicate exchange platform Syndex.
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