Mr Samway recently spoke to InvestorDaily Uncut about the potential investment opportunities in agricultural land due to the long-term demand for protein-based food, its strength as an inflation hedge, and its low volatility.
“I think most people thinking about agriculture in Australia have a misunderstanding of what it really is about,” he said.
Mr Samway explained that the appeal of agricultural land as an investment asset lies primarily in its lack of correlation with most other asset classes, however, it is highly correlated to the global long-term demand for high quality food.
“There’s this growing world population, and a lot of that world population growth is in countries where, at the moment, people largely exist on carbohydrates. And as they move increasingly into middle class, they demand access to protein, and as they get further into middle class, higher-quality protein, and meat products is one of those things,” Mr Samway said.
“So we’re looking at the next 30 years, and recognising that the demand for Australian beef, in particular, which is seen as clean and green, we don’t see that falling.”
Secondly, farmland as a ‘real asset’ investment is a long-term inflationary hedge with strong commodity representation in CPI benchmarks for raw materials or food, and has outpaced inflation rates over the long term in a variety of global market environments.
Another selling point for investors is the asset’s relatively low volatility, especially against a setting of volatile equities.
“Agricultural land in Australia has accreted at about 6 to 7.5 per cent per annum over a 10-year period,” Mr Samways said.
“So occasionally, it runs ahead of itself, and occasionally it goes nowhere for a couple of years, but if you break that 100-year cycle into just 10-year bites, basically it’s been a 6.5 per cent to 7.5 per cent return before you do anything to the land”.
Overall, according to Mr Samway, investing in agricultural land will provide investors with an asset that is guaranteed to provide long-term capital growth.
“This is an investment that people should think about as a 25-year investment. This is not something that you buy and trade. This is the asset that you buy and leave to your kids,” he said.
To hear more from Mr Samway click here.
