Population growth and the associated growth of the new middle class across the globe will increase the demand for Australian food and fibre and boost intensive agriculture assets, says Centuria’s Kelvin McKeown (pictured). 

McKeown, who manages the Centuria Agriculture Fund, told the PFA 2023 Conference in Canberra that Centuria saw a big future in Australia for intensive farming.   

He referred to the surge in middle class growth across the globe, including South America and Africa, with the most pronounced growth in Asia.  

“Australian intensive farming accounts for around 400,000 hectares of farming and growing. While this is substantial it is still low compared to land allocated to traditional farming methods,” McKeown said.  

“As land becomes more productive its value understandably increases, and the yields become very different. While intensive agriculture attracts a high value, it brings potential for high cashflow returns.  

“We’ve taken a different approach from most agricultural funds, with a big focus on cash returns and earning capacity, not just capital growth. Centuria sees a long-term vibrant future for these more sophisticated farming assets, which have the potential to deliver attractive cash flows.” 

He said the yield focus was driving Centuria to highly productive land including ‘protected cropping’, such as crops grown under large-scale netting or in glasshouses.  

These assets were highly attractive but only accounted for approximately 14,000 hectares of Australian farming land, a tiny percentage. 

“Protected cropping includes vine crops such as tomatoes, capsicums and cucumbers in glass houses, substrate berries under plastic tunnels or netting, mushrooms in warehouses,” he said.  

“These assets are substantially more efficient and reliable than growing in the field and so generally attract premiums from the supermarkets, particularly as they can grow fresh produce out of season. The barriers to entry are substantial. For example, super high-tech glasshouses cost $5-6 million per hectare to build and are only of value if there is additional demand and available supply agreements, which are not easy to come by.  

“But the value is created through efficiency premium linked to these growing methods, the technology involved, which may include things like desalination facilities to ensure consistent water. The value also reflects the fact they are hard to replicate, with very high barriers to entry for the competition.” 

The Centuria Agriculture Fund has recently purchased three high tech glasshouses including the Flavorite facility in Warragul, Victoria; the Sundrop facility in Port Augusta in December 2022; and the Costa Guyra facility in March 2023.  

Centuria is one of Australia’s largest large-scale glasshouse landlords.  

McKeown said Centuria leased the glasshouse facilities to large corporates with specialist skills to manage the controlled environment.  

“These glasshouses are incredibly productive and they demand constant management and strict biosecurity controls – part of the attraction is the ability to partner with quality tenants,” he said.  

“In a field there are more problems to contend with.  With a crop like tomatoes, you can expect 65 tonnes of fruit per hectare per year. But a glasshouse can achieve 800 tonnes per hectare per year.”