New Zealand’s sovereign wealth fund – the NZ$35 billion (US$25 billion) New Zealand Superannuation Fund (NZSF) – has made an undisclosed investment in Palgrove, an Australian beef stud operation, marking the first institutional investment in the Australian beef industry, and the first offshore agricultural investment for the superfund.
Launched more than 40 years ago by Peter Bondfield, an early importer of the Charolais breed of cattle into Australia, Palgrove has since been taken over by David and Prue Bondfield, who have seen the company grow from an original herd of 50 cows to more than 2,500 registered females today, with operations in New South Wales and Queensland.
Palgrove also has pioneered the development of the Ultrablack breed which has gained notoriety amongst commercial buyers across the country.
“We have been looking at the Australian beef industry for some time as part of an overall diversification strategy for the fund,” said Neil Woods, portfolio manager with NZSF. “We concluded very quickly that people, and more particularly their management expertise, were key to any successful investment in this asset class.”
“We were drawn to the Palgrove opportunity for several reasons,” said Woods. “The Bondfields are viewed as leaders in the beef seedstock industry, they have a significant history of development and growth and have the integrity we look for in our partnerships.”
The addition of Palgrove to the NZSF portfolio raises its combined allocation to farmland to NZ$340 million (US$242 million), or approximately 1 percent of its total funds. Over the past seven years the fund had accrued 22 New Zealand-based farms among its assets, but the Palgrove deal adds an additional 11 Australia-based farms to the mix. In the long run, Woods told Pensions & Investments that the fund is targeting an allocation of 3 percent to farmland and land-related investments, noting that returns for the asset class have ranged throughout the mid-to-high single digits.
For Palgrove, the deal gives the company the ability to expand its herd numbers, with expectations of adding another 1,000 head in the short term, and accelerate the development of new genetics, especially in regard to its Ultrablack pipeline. It also will lift the company’s ability to export its genetics to other markets, including China.
The Lure of Good Genes
Another deal for a stake that gave investors control of elite Australian cattle genetics occurred in May of last year when Australia Aulong Auniu Wang (AAAW), the cattle arm of Chinese supermarket and department store giant Dashang Group, acquired the key Australian Wagyu beef operation Kuro Kin in an off-market deal.
The deal, which is reported to be valued between $12 million and $20 million, included the 1,100-head Kuro Kin Wagyu herd and the 3,500 hectare Wooton farm owned by the Bishop family.
With a fully integrated, completely traceable supply chain in mind, Dashang plans to breed its own Angus and Wagyu cattle on its own Australian farms. The cattle will then be processed and sold as branded beef through the group’s retail outlets on the Chinese market, creating the first “dedicated Australian beef outlets in China”, reports The Australian.
“We want to provide our customers with a farmgate template – many companies say they do that but we are genuine because we will own the farms and have control over the total supply chain,” AAAW General manager Michael Wang told Farm Weekly. “The Bishop family has done a very good job developing genetics and to achieve our longer-term objectives, operational investment will be ongoing.”
No Bull
Reflecting the importance the industry places on high quality genetics, and the quality of Palgrove’s bulls, in June of this year, a new record was set at Palgrove’s Hunter Valley Charolais Bull Sale. The company sold bulls to commercial buyers located across New South Wales, Queensland, Victoria, and northern Tasmania, with the top buy selling for $24,000.
More recently, at the company’s 2017 spring bull sale conducted in September, out of 157 bull offered, 100 Charolais bulls averaged $13,065 – the highest average on record for a Charolais sale, according to Beef Central, while 57 Ultrablacks averaged $10,351 – also a record.
Numbers such as these should be expected to continue from Palgrove, as the day-to-day management of the company will not change post-investment.
“NZSF has the appropriate level of understanding of agricultural investing; a commitment to long-term investment horizons and a high standard of governance, responsible investing and operating sustainably,” said David Bondfield. “These strengths will make them a valued partner. Palgrove and NZSF are very excited about prospects for the beef industry.”
-Lynda Kiernan
The post New Zealand Super Makes First Offshore Farm Investment appeared first on Global AgInvesting.