The $426 million agricultural corporate PrimeAg Australia is hoping to lock in several new large scale property purchases for its unlisted PrimeAg Agricultural Fund (PAF) by spring - assuming it can outbid some stiff competition from family farmers also vying for top shelf farming country.
PrimeAg, listed on the share market on Christmas Eve 2007, is looking to grow its 33,000-hectare portfolio in Queensland and NSW.
The PAF venture, managed by PrimeAg and jointly backed by the Commonwealth's giant Future Fund, is adopting PrimeAg's farmland ownership model as it builds a $600m investment vehicle focused on big scale cropping aggregations.
But as PrimeAg managing director Peter Corish conceded, buying quality farms was not as easy as it may seem for corporate investors.
"Our most strident competitor is the family farmer living next door," said the former NSW-Queensland border cropper, grazier and National Farmers Federation boss, turned corporate farming chief.
"They can see the value in expanding and are prepared to take a bit less return for a while to grow their business if there's a good buying opportunity over the fence or nearby.
"Corporates, however must be disciplined in spending within limits which will achieve set rates of return that satisfy their investors.
"Corporate agriculture might be growing, but I also have great faith in family farming and expect family enterprises to remain the backbone of our industry.
"We'll find they'll always give us quite a bit of competition for acquisitions."
Mr Corish, who sold two farms from his own Goondiwindi-district holding to PrimeAg when he teamed up with a group of city and rural investors to launch the company's initial eight-property venture, now finds himself competing with family enterprises like those run by his sons Simon, Brett and Nigel and daughter Erin, who shared a "refreshing enthusiasm" for farming's future.
"I'm pretty encouraged that they, and lots of their mates, see their future so strongly in ag."
To make its own mark on agriculture's future PrimeAg sees success growing from its formation of large scale farming hubs in specific regions.
The strategy includes buying established aggregations which Mr Corish reasoned were likely to be beyond family farmers' budgets.
The company is targeting earnings in the top 20pc bracket for farms that predominantly operate summer and winter cropping enterprises, with its efforts currently weighted towards irrigated cotton.
Part of its performance strategy is to minimise risk by holding farmland in safer rainfall areas across a range of geographic and climatic zones.
PrimeAg's current six regional property hubs spread from Emerald in Central Queensland to NSW's Liverpool Plains also enable it to achieve economies of scale by sharing machinery, labour and management experience.
Although operations are currently focused in the northern NSW-Queensland grain belt, Mr Corish has not ruled out shopping for property further south or even Western Australia or South Australia for the PrimeAg fund once it draws in extra investor backing.
"I'm not saying other States are on the radar now, but we want to stay investing in Australia and we could look further afield as the fund grows," he said.
To achieve its goal of a $600m war chest for large property acquisitions, PAF expected to gather together "only a handful" of supporting investors.
PrimeAg is limiting its own stake in PAF to its present $125m.
The Future Fund will boost its current $125m investment in PAF to as much as $200m once a third investor comes on board to chip in at least $75m.
Although PAF's land acquisitions - large irrigated or dryland holdings - are likely to be bigger in scale than PrimeAg's own (not inconsiderable-sized) farms, Mr Corish said the intention was to buy in the same broad geographic areas as PAGs existing portfolio.
"We've made offers on a number of properties and I'd like to think we'll have some acquisitions for the fund on the books in coming months - by spring," he said.
"We'd like to secure a number of potential purchases as soon as possible, but we aren't going to compromise on rates of return."
Meanwhile, cashed-up after offloading six "non-core" farms from its own portfolio in late May for $36.7m, PrimeAg is now on the hunt for potential replacement land closer to its operational hubs.
The two property groups on Queensland's Darling Downs and around North Star in North West NSW were sold to Global Ag Properties Australia because they no longer fitted PrimeAg's production strategy, particularly as they were a bit too far from its main hubs.
Another two holdings - the 2490.9ha "Kurrajong Hills" aggregation in NSW at Warialda and the 1684ha "Lakeland Downs" at Condamine, Queensland are also on the market for much the same reason.
Mr Corish said there was no rush to sell but both operations had a strong grazing component, which did not fit with PrimeAg's moves to fine tune its focus on cropping earnings.
Source: farmonline.com.au
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