If the holy grail of investing lies in the concept of non-correlated return streams with which to build truly diversified portfolios, insurance-linked securities (ILS) should emerge as one of the options for investors; but they are still not well-understood. That was the message that John Wells, co-founder and chairman of London-based Leadenhall Capital Partners, had for The Inside Network’s recent Alternatives Symposium.
Gold’s spectacular rise has been a feature of the markets over the last couple of years, and judging from how the investment banks are sharpening the pencil on their price targets, that trend seems likely to continue, as gold’s ‘NETGO factor’ intensifies.
Quiet-achiever asset class gets on with the job
According to the latest quarterly Australian Farmland Index (fourth quarter, 2024) compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV), Australian farmland has posted a total annualised return of 9.67 per cent, from inception date of 31 March 2015, to 31 December 2024.
This return consists of an income return of 4.82 per cent a year and a capital-growth component of 4.70 per cent.
The last five years recorded a total annualised return of 5.57 per cent, comprising income return of 3.65 per cent and capital growth of 1.86 per cent. The last three years recorded a total annualised return of 1.24 per cent, made up of income return of 1.31 per cent and capital loss, to the tune of 0.09 per cent.
The ANREV index now represents 63 different farmland properties, of market value over $2.22 billion, split between 44 per cent that are ‘permanent’ (that is, horticulture) and 56 per cent that are ‘annual’ (cropping and livestock) farmland assets.
In this way, the index captures the broad diversification of Australian agriculture.
The asset class is popular among endowment-style investors, for example, the famed endowment funds of the top US universities, because the assets can be used to generate income or provide long-term value, and farmland is an asset class that offers potential for stable returns and inflation protection.
Agricultural land values aren’t correlated with more traditional asset classes such as equities, bonds and commercial and residential real estate and while the values of these assets fluctuate, agricultural land continues to deliver reliable and steady returns.
The stable long-term returns from agricultural land also stand in contrast to the volatile performance of the agricultural sector itself which is buffeted by drought, flood or commodity prices.
Farmland is used by some Australian superannuation funds, but retail exposures are difficult to find. But more investors are looking at farmland in the expectation that the solid returns will continue, based on limited supply of land, growing prosperity in Asia that is creating more demand for food (in particular, protein) and the burgeoning interest in and awareness of ‘natural capital’ as an asset class, along with the potential for carbon and bio-diversity credits as adjuncts to agricultural production.
While not all commodities and regions performed uniformly across the continent, with wide variations in climatic conditions, there was seemingly plenty of cheer in Australian agricultural world in 2024.
ANREV participant Rural Funds Management describes the major category highlights as follows:
Annual Farmland (inc. livestock, cropping)
- In 2024, the Australian livestock industry exported its largest-ever volume, representing 2.24 million tonnes of red meat sent to 104 countries. The strongest growth for beef exports was seen in the United States, where exports lifted 60 per cent, and Southeast Asia, where exports lifted 33 per cent. Beef production reached over 671,000 tonnes in the December quarter, up 1.9 per cent from the previous quarter and bringing the total 2024 production to more than 2.5 million tonnes.
- Similarly, lamb production reached over 629,000 tonnes in 2024, up approximately 5 per cent on 2023. Australian exports of lamb rose to 359,299 tonnes, a 10 per cent improvement on the previous record (2023).
- Australian cotton production is forecast to be well above the ten-year year average, with more than 4.5 million bales produced. Cotton production has been supported by favourable seasonal conditions and water availability in key planting regions.
- These conditions are also expected to benefit wheat production, with harvest expected to reach 32 million tonnes, up from 26 million tonnes last year, boosting exports and influencing prices. From a rainfall perspective, several key growing regions including northern WA, NSW, Queensland, and Victoria recorded above-average levels, benefiting soil moisture and summer crops.
Permanent Farmland (inc. horticulture)
- Australian almonds surpassed the official crop intake in 2024, hitting a record high of 158,339 tonnes to the end of December. Export demand drove these volumes, with China and India leading the way. These nations, both with trade agreements in place with Australia, now make up 69 per cent of total exports. December sales were the largest since industry sales reports have been maintained, up 56 per cent on the previous year, resulting in an expected increase almond price in 2025, with some producers expecting price increases of about 20 per cent.
- Australian macadamia production reached 57,850 tonnes in 2024, representing an 11.4 per cent lift on the previous year’s crop, due to favourable growing conditions. The industry also experienced a significant price recovery, up from $1.80 per kilogram nut-in-shell (NIS) in 2023, to $3.20/kg NIS in 2024 – a price that has risen above $4.20/kg NIS in 2025.
- Market conditions for citrus and other summer fruits have improved substantially with exports pushing new levels and higher domestic and export prices. But table-grapes were an exception, experiencing a poor production season.
“The fundamentals within the agricultural sector continue to improve, with numerous commodities experiencing record production volumes following good growing seasons, as well as improved prices,” says James Powell, general manager of investor relations at Rural Funds Management.
“An example is the recently announced 2025 macadamia price of $4.22 a kilogram, representing an increase of a 30% on the 2024 price and an increase of over 130% on the 2023 price.”
