KEY POINTS:
Agriculture fund Australian Primary Producers is looking to Kiwi investors to help raise cash to invest in farms.
Managing director Andrew Skidmore says the reaction has been overwhelming.
"New Zealand investors naturally get agriculture," Skidmore said. "I think it's something that's hard wired into them."
A capital raising
is under way in both Australia and New Zealand and Skidmore aims to raise up to A$150 million to invest in operations including dairy, grain and horticulture.
The Sydney-based fund plans to take a 50 per cent stake in profitable operations with long track records and would be investing in people as much as in assets, Skidmore said.
"We want to keep the expertise there and that's why we've spent two years sorting through and finding the ones that want to be in the business, they want to expand their business and they don't want to cash out of their business."
The money paid for the half share of an operation would be reinvested.
The fund currently had two seed investment options - potentially accounting for A$30 million - including a dairy operation and an integrated cropping and piggery, which produced about 110,000 to 115,000 pigs a year.
At this stage the fund was looking to invest in Australia.
An independent research report by Aegis predicted cashflow returns of 11.6 per cent, Skidmore said.
Agriculture commodities were not affected by the vagaries of stock markets and the fund was a simple structure with direct exposure.
"A lot of these operations have been offered money for their land and their water but they want someone to share the upside with them but to do that they [investors] also have to share the production risk."
Until two years ago technology had always kept ahead of the demand curve for food, he said.
But in the US grain stores were at the lowest level since 1946, with 40 days supply, while 30 per cent of land going to corn production was mandated for biofuel, Skidmore said.
"Now you've got 300 million people over the next 20 years moving into cities from rural areas in China," he said.
Australian Primary Producers was not putting any debt into the structure, which set them apart from many other investments, he said.
Skidmore, who grew up on a New South Wales sheep farm, said the idea of not having debt was burned into his psyche. "I've seen very much on many levels the effect that on-farm debt can have both financially and personally," he said.
FIELD DAY
* Fund aims to raise A$150 million.
* Planning to take a half stake in operations.
* Partnerships will retain farming expertise.