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Agribusiness sector a practice to watch
Despite an array of challenges presented in the global pandemic during 2020, Australia’s agribusiness sector continues to grow with key trends making it a practice to keep an eye on.
Tony Zhang
A new report from MinterEllison, Ahead of the Harvest, 2020-2022 found that the commitment of federal and state governments to make infrastructure spending a priority to stimulate the economy through COVID-19, has been key to attracting investment into the agriculture sector.
The firm said Australia’s political stability and legal certainty offer confidence for investors in Australian assets.
“The fast-tracking of infrastructure projects by state governments and the federal government’s $1 billion Relief and Recovery Fund to support regions, communities and industry sectors (including agriculture) will contribute to a stable climate for future investment,” MinterEllison partner Matthew Cunningham said.
In particular, infrastructure investment will help with agribusiness’ market distribution. The report found that it is encouraging that before pandemic factors came into play, the infrastructure currently in place was considered more than adequate by respondents, with 65 per cent, nominating it as a reason to invest.
“Superannuation funds have also expressed an appetite for investing in infrastructure, further demonstrating confidence in infrastructure as an important driver of economic recovery for the economy at large, and specifically the agriculture industry,” Mr Cunningham added.
Australia’s success in negotiating free trade agreements (FTAs) is highly regarded by investors with 72 per cent citing FTAs as Australia’s top advantage when considering agribusiness investment.
MinterEllison said COVID-19 highlights the promise of this sector even further, as the global demand for high-quality produce increases.
A focus on national food security in the wake of short-term product shortages as a result of “panic buying” has driven a higher demand for Australia’s agricultural products according to the report, which is perceived by respondents as having sound food and safety standards, and clean and green initiatives.
Main barriers to investment include climate change and natural disasters which were identified by 82 per cent of respondents. Australia’s ageing farmer population was also identified as a challenge for the sector.
“Short-term, these opportunities have been paused as global economies suffer the consequences of the COVID-19 pandemic, however, longer-term, Australia’s negotiations to open more markets in the Asia-Pacific region will be good news for agribusiness investors and mergers and acquisitions,” said MinterEllison partner, Glen Sauer.
The report further showed that a majority of respondents say the stability of governance and legal transparency highlights Australia’s attractiveness for agribusiness investment.
“Australia’s strong foundations, sound governance and transparency make it one of the safest places in the world to do business and with the politically bipartisan approach to infrastructure investment, this is unlikely to change in the near-term,” Mr Sauer said.
“There is no doubt that COVID-19 has put a pause on the world’s focus on new M&A transactions and while it’s clear there will be significantly reduced volumes of activity in the agriculture sector for the remainder of 2020, our expectation is that there will be a modest recovery in 2021, with further strengthening in 2022.”
