Canadian-based agribusiness juggernaut PSP Investments is now spending up to $3 billion a year expanding its farming footprint around the world - more than half of which is going into Australasian operations.
"Our remit is for agricultural investment globally, but we like Australia," said the $180 billion Montreal investment fund's senior manager and head of its natural resources division, Marc Drouin.
Although the cashed up government pension fund only made its first farmland foray in Australia in 2015, it now has a portfolio of joint venture pastoral, broadacre cropping, orchard, grain storage, water and agricultural processing assets estimated to be worth way more than $4b.
In fact, its positive partnership experiences in Australia have set the template for gradual expansion into other agricultural and forestry geographies around the globe.
Australia, however, remains the main base for about half of all its natural resources investments, which were valued at more than $8b when the group reported its asset position last financial year.
Growth spurt
In the past 12 months PSP has further expanded its Aurora Dairies joint venture with Warakirri Asset Management to more than 12,000 hectares in Victoria and South Australia.
Early 2020 had already seen it take ownership of 12,000ha of almond orchards in northern Victoria after paying more than $850m to Olam International, and then outlayed a similar figure for Webster Limited's 340,000ha of walnut, cotton and pastoral assets in NSW and Tasmania.
Webster's business was subsequently portioned up between PSP's Stahmann Farms nut farming and processing joint venture, its Queensland-based Hewitt Cattle Australia partnership, and farming ventures involving its former directors Chris Corrigan and David Fitzsimons.
We've really found traction in Australia. It ticks all the boxes for us
- Marc Drouin, PSP Investments
Back in the spotlight last week, PSP has largely bankrolled the Auscott cotton company takeover by Australian Food and Fibre in northern NSW.
AFF has been a joint venture partnership between the Canadian fund and Moree's Robinson family since 2017.
No price has been disclosed, but the market had expected Auscott's three NSW farming units and six gins to sell for more than $500m, and bidding from local and offshore interests was keen.
The AFF-PSP partnership had earlier started its move on the 58-year-old US-owned cotton farming, ginning and marketing business in 2019, buying Auscott's 17,300 hectare Midkin aggregation and gin at Moree, reputedly for about $300m.
"We like the margins on cotton in Australia," Mr Drouin said.
"The soil is good and the low cost of production sits well on a global scale - it runs a better margin than US cotton."
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He conceded PSP was mindful of potential "vagaries of trade frictions" associated with raw cotton sales to China, which six months ago pulled down the shutters on imports from Australia.
"These are short term issues and we have seen through them," he said.
"We're very much focused on the long term, including other end markets developing around the world."
For many reasons PSP felt Australia provided a comfortable long term environment for the fund's growth.
In the coming decade PSP was on track to double its global natural resources investments, with about half of that growth likely to be here.
"We see a large pool of potential partners in Australia," he said.
"We've really found traction in Australia. It ticks all the boxes for us.
"We like the focus on rule of law (in Australia) and strong governance structures, occupational health and safety and sustainability, and the fact that foreign investment is welcome."
What's PSP's agenda?
Mr Drouin would not reveal the size of the stakes PSP held in its seven partnerships with local producers and investor groups, except to say its share tended to grow over time.
"We start with a partner, usually a family company which has invested in the original asset, and then provide capital for continued growth," he said.
"We have tended to own more of the business over time, although there's no formula or preferred ownership split.
"We want them to be able to make most of the operational decisions.
"While we think we're pretty smart at running a business, we're really looking for partners with on-the-ground expertise."
The AFF venture with the Robinson family now ranks as one of PSP's biggest ventures.
Value-added appeal
The geographically diverse cropping and post-farmgate enterprise also had plenty of seasonal and market risk mitigation appeal.
With its cotton marketing and ginning businesses already servicing many other customers, AFF could build new revenue without being heavily reliant on its own farm productivity for throughput.
"As we have increased our expertise in Australia we've grown more comfortable with spreading our portfolio, initially finding with tree nuts that investing in post-farmgate processing gives you leverage to get more end market efficiencies and returns," Mr Drouin said.
"Interestingly, however, of all the businesses we've bought into, livestock production (Hewitt Cattle Australia) has so far proven to have far less volatility in returns than we expected."
Forestry, already a significant PSP area of investment interest in North America and more recently New Zealand, is also on its Australian radar, although nothing explored so far has evolved into a purchase agreement.
Where PSP Investments has its money in Australia -
- Stahmann Webster - nuts
- Hewitt family's Hewitt Cattle Australia - beef
- Robinson family's Australian Food and Fibre - broadacre cropping, marketing and cotton ginning
- BFB - cropping, grain storage and logistics
- Simpson family's Simpson Farms - avocado farming, packing and value-adding
- Daybreak Cropping - grain cropping joint venture with Wararkirri Asset Management
- Aurora Dairies - dairy farming joint venture with Warakirri Asset Management
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