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Investing in AgTech: the best of both worlds

Food sustains life. It is the lynchpin of living. But in an era of extreme weather depleting crop yields, and rising global populations driving demand for produce, the need for smarter agricultural technologies to ensure reliable, sustainable food supplies is more crucial than ever.

In this scenario, agriculture needs to become more efficient, both in production and distribution. To achieve this, investments in technology and innovation across the agribusiness spectrum are essential.

It’s where investors can gain exposure to a burgeoning sector that will become increasingly vital for the planet’s and people’s wellbeing. And in so doing, bring new meaning to what a diversified portfolio could look like.

AgTech in action

What then are the central drivers behind innovation in AgTech? At a basic level, it’s the development of tools and processes striving to increase agriculture yields while reducing environmental impact and resource use.

In practical terms, it involves five broad areas of intent:

1

Increased efficiency and productivity

Innovations like precision farming, automated machinery, advanced irrigation systems, soil sensors and protected cropping structures contribute to higher, more consistent crop yields and reduced wastage.

2

Sustainability and environmental enhancements

AgTech promotes smarter farming practices by reducing the use of pesticides, fertilisers and water. And technologies like drones and satellite imagery help monitor crop health and optimise resource use, minimising environmental impact; all of which aligns with investors seeking ESG (environmental, social, governance) credentials in their portfolio.

3

Better risk mitigation

AgTech can mitigate risks associated with climate , pest infestations and disease outbreaks. Predictive analytics, protected cropping and real-time data allow farmers to make informed decisions, reducing the potential for crop failures and financial losses.

4

Enhanced traceability and compliance

Implementing advanced tracking and data analytics tools enables better traceability of food products from farm to consumer. This enhances food safety, meets regulatory compliance, and builds consumer trust in Australian agricultural products.

5

Integration of renewable energy solutions

AgTech is increasingly incorporating renewable energy solutions to reduce carbon footprints and energy costs. This includes the use of solar panels to power operations and biogas systems that convert waste products into energy, contributing to a circular economy in agriculture.

Importance of AgTech in supply chain and food security

Innovations in AgTech play a crucial role in improving the reliability and consistency of food supply and its security. By so doing, AgTech can:

enhance the efficiency and sustainability of farming operations
stabilises food prices
ensure a steady supply of food, which is vital for feeding a growing global population.

This reliability transforms agriculture into critical infrastructure within the supply chain, increasing its financial sustainability and importance.

And when you consider the expected increase in global demand for Australia’s high-quality agricultural and food products, thanks in part to our farming and supply chain systems, rigorous inspection and compliance protocols, and geographical advantage being on Asia’s doorstep, investing in agriculture does become a highly attractive proposition.

Centuria is the largest owner of high-tech glasshouse assets in Australia.

Leveraging the benefits of innovation.

Protected cropping via high tech glasshouses and greenhouses is on the cutting edge of innovation.

These controlled growing environments have become the fastest growing food-producing sector in Australia, with annual average growth of more than 60% over the last five years.¹

Such assets not only provide the ability to grow a wider variety of crops, but they also employ a range of technologies to increase yield and promote year-round farming through innovations like:

Coloured LED lighting to extend growing times and enhance plant life
Climate control technology to promote optimal growing conditions with protection from climatic, pest and quality risks
Little or no-soil systems reduced water usage and exposure to soil borne pests and disease
Light diffusing glass panels which evenly distributes the available light, increasing crop yields by up to 15% from standard glass.

Why Australian AgTech makes a smart property investment

Investing in Australian offers a unique opportunity to benefit from the booming global demand for safe and sustainable products.

Agriculture can provide access to high-quality, environmentally friendly investments that provide both income and capital growth potential in a rapidly evolving sector.

This evolution of, and innovation within, the agriculture sector is also enhanced by Australia’s:

Longstanding reputation for quality produce, exacting production standards, stringent biosecurity and traceability systems, and low sovereign risk.
Culture of technical innovation amid government prioritisations.
Regional proximity to Asia, with its fast-growing population and changing consumer patterns.

As Andrew Tout, Centuria’s Head of Agriculture and Transactions Manager, says, “the growth of the middle class in the Asia Pacific region is set to double by 2030.”

According to Andrew, we’re perfectly placed to meet this demand because “we have very skilful farmers who are able to utilise the biological asset, being the farm, the water that you’re able to deliver to it, but what they’re doing well is using technology to affect the environment that these crops are being grown in.

“As an investor, you’re investing in the land and the water and the delivery of infrastructure for that farm. Investors ultimately benefit from the strength of agricultural demand as it enhances the stability and profitability of the farm operator’s business and this delivers reliable rental income to the investment vehicle owning the land. Ultimately the ability of a farmer to generate income will result in the future rental prospects for the asset and potential future value of the asset for investors.”

Agricultural businesses and their associated land and infrastructure assets do come with risk, including environmental and climate associated risks with farming in Australia. However as noted above, AgTech may help to manage the risks associated with the environment and climate on farmer’s income variability which improves the prospect of consistent and reliable income to the landowner.

Given the endowments — geographical, political and reputational — of Australia’s agriculture sector, its future performance looks extremely positive while also remaining globally competitive due to strong underlying fundamentals.

How to own a ‘piece of the farm’ without becoming a farmer

While agriculture is a huge sector, one accessible option for investors might be an unlisted property fund; particularly one that focuses on high-quality fresh food production.

In this scenario, fund managers would typically seek an asset with a strong lease agreement in place (with annual rent escalations), and a reputable tenant to ensure consistent income. Location and access to appropriate infrastructure such as processing and transport are other considerations.

Apart from the diversification benefits of such an asset, investors can access regular income distributions and the potential for capital gains.