Farmland index could may ag boost funding

The Australian Farmland Property Index, launched last month , showed that farmland had an average return of 23.9 per cent, consisting of 8.3pc income and 14.6pc from capital appreciation for the year to June 30.

ANZ was one of several key players in the property market to contribute financially to the preparation of the index.

It measures the performance of a pool of farms owned by corporate entities, acknowledging the importance of such an index in helping institutional investors make decisions, Mr Bennett said.

 "For pension and superannuation fund money to find its way into agriculture it has been slow but maybe some of that investment would be quicker and better placed if there were guiding posts like this index in place," he said.

He said such indices helped justify some internal decision-making processes when it came to investment in agriculture.

The bank has estimated Australia's agricultural sector needs to raise an additional $109 billion in capital if the industry is to maintain its current share of exports by 2025.

One small way that part of this capital could be raised is through some securitisation of agricultural assets –  the process by which an illiquid asset, or group of assets are transformed into a tradeable security.

"An organisation will tackle (the capital requirement) in different ways and securitisation might be part of that," Mr Bennett suggested.

"I don't see it as the biggest part of the solve in terms of the capital need but I think it is a relevant component."

In the US, one group known as Farmer Mac – a publicly traded company based in Washington - was set up to provide an agricultural equivalent of the failed Freddie Mac and Fannie Mae, which were created to securitise residential mortgages that later collapsed in the financial crisis.