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Australian Geographer
ISSN: 0004-9182 (Print) 1465-3311 (Online) Journal homepage:
The redefined role of finance in Australian
Nicolette Larder, Sarah Ruth Sippel & Neil Argent
To cite this article: Nicolette Larder, Sarah Ruth Sippel & Neil Argent (2017): The redefined role of
finance in Australian agriculture, Australian Geographer, DOI: 10.1080/00049182.2017.1388555
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Published online: 23 Oct 2017.
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Date: 28 October 2017, At: 12:46
The redefined role of finance in Australian agriculture
Nicolette Larder
, Sarah Ruth Sippelb and Neil Argent
Department of Geography and Planning, University of New England, Armidale, NSW 2351, Australia; bCentre
for Area Studies, University of Leipzig, Leipzig, Germany
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In their highly influential teaching and research text Global
Restructuring: The Australian Experience Fagan and Webber set out
a substantivist, institutionalist and multi-scalar account of the
Australian space economy’s relatively rapid and radical
globalisation after 1980. This paper extends Fagan and Webber’s
global restructuring thesis to Australian farming and agriculture,
connecting historical and more recent scholarship on agriculture–
finance relations. We highlight two areas where finance has
fundamentally reshaped the agricultural sector. First, we argue
that financial restructuring has shifted the relationship between
farmers and lenders. Second, we suggest that under the logics of
finance, Australian land and water are emerging as ‘alternative’
financial asset classes. The paper demonstrates that Australian
agriculture has become subject to a comprehensive process of
finance-driven economic restructuring over recent decades.
Regulatory changes since the 1980s have resulted in an
agricultural sector where finance’s growing role is normalised as a
part of the sector’s operation. Importantly, we stress the
paramount role governments have played in redefining agrifinance relationships in Australia by promoting and providing the
regulatory framework for processes of marketisation and
assetisation, thereby making agriculture attractive to subsequent
financial investments. Finance does not operate on its own but
relies on the state’s crucial role in incentivising and setting the
conditions for finance capital.
Agriculture; farming;
financialisation; assetisation;
In their highly influential teaching and research text Global Restructuring: The Australian
Experience Fagan and Webber set out a substantivist, institutionalist and multi-scalar
account of the Australian space economy’s relatively rapid and radical globalisation
post-1980. Core to Fagan and Webber’s concerns were the consequences of the sudden
exposure to international markets (and market players) for select industry sectors, their
workers and place-based communities of interest. Global Restructuring identified four
major types of restructuring process: sectoral, geographical, productive and regulatory.
Although their analysis is multi-sectoral, Fagan and Webber concentrate on the secondary
and service industries, and say little about agriculture. Given the book’s concentration on,
CONTACT Neil Argent
Armidale, NSW 2351, Australia
© 2017 Geographical Society of New South Wales Inc.
Department of Geography and Planning, University of New England,
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inter alia, the impacts on organised and non-organised labour of the dramatic regulatory
and organisational changes to the operation and management of major employment
sectors such as manufacturing, this restricted vision can easily be defended. Nonetheless,
like manufacturing and other sectors, the agricultural sector experienced profound
restructuring during the 1980s. In short, this shift was from a highly regulated and protected sector to one that was exposed to the vicissitudes of global financial markets, transnational corporations, fully commercial banking and international commodity markets,
all of which had profound effects on farmers, agribusiness firms, agricultural workers
and the rural communities that are home to at least some of these.
In this paper we extend Fagan and Webber’s global restructuring thesis to Australian
farming and agriculture, connecting our analysis to both historical and more recent scholarship on agriculture–finance relations, subsumed under the ‘financialisation’ of agriculture and food literature. The ‘financialisation’ literature, which is now ubiquitous in
economic geography and sociology, has mushroomed since the late 2000s. In the years
since Burch and Lawrence (2009) argued that the agri-food system was increasingly influenced by financial actors and interests, i.e. ‘financialised’, numerous scholars have sought
to understand how contemporary finance capitalism is operating with respect to the agricultural sector (see, for example, Newman 2009; Clapp and Helleiner 2012; Fuchs, MeyerEppler, and Hamenstädt 2013; Clapp 2014; Isakson 2014).
Two important shortcomings have emerged from this literature. First, much of the literature has failed to engage with the historical background of the agri-finance nexus and
treated finance as an outside force suddenly appearing on the agricultural scene in the last
decade (Gertel and Sippel 2016; Ouma 2016). Second, and related, finance capital has
often been portrayed as ‘colonising’ agriculture as an outside force (Williams 2014,
402), overlooking the ways in which state reregulation has facilitated the reshaping of
agri-finance relationships (Martin and Clapp 2015). In taking a sustained look at key
developments that have shaped agri-finance relationships in Australia since the 1950s,
this paper seeks to address these shortcomings and focuses in particular on the role
that successive governments have played in setting the regulatory conditions for the
growing role that debt finance, financial markets and financial actors now assume in Australian agriculture. The paper draws on the available academic literature on the topic, combined with secondary document analysis of government documents and policy papers.
Moreover, it builds on the previous work of Larder and Sippel who, as part of a
broader research team, have been conducting research on the financialisation of Australian agriculture since 2012, including various periods of ongoing fieldwork.1
Following writing on the role of government in setting conditions for financialisation
(Martin and Clapp 2015), the financialisation of everyday life (Martin 2002), and cultures
of finance in Australia (Greenfield and Williams 2013), we point to two areas where
finance has fundamentally reshaped the agricultural sector. First, we argue that financial
restructuring has shifted the relationship between farmers and lenders. The reregulation of
the banking sector and subsequent reregulation of lending have combined to change the
way in which farmers fund their operations, which in turn has meant farmers are increasingly seeking out new avenues of capital to fund their operations. Second, we demonstrate
how, under the logics of finance, both land and water are emerging as ‘alternative’ financial
asset classes, that is to say they are currently being actively converted and constructed as
investible assets to deliver income streams for investors. In the case of farmland, this
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‘assetisation’ relies on a farmland market that has been well established for many decades;
in the case of water, the construction of water as an asset class has been supported by more
recent regulatory actions to establish water markets.
The paper starts with a brief review of the finance capitalism literature and interprets
key processes in the Australian economy in this context. We then give an overview of the
most important developments in the restructuring of agri-finance in Australia since the
1950s to the early 2000s, illustrating how these have laid the ground for the period of
‘intensified financialisation’ being witnessed today. Based on this historical background,
we identify two main areas where the reconfigured agri-finance interlinkages are
notably pertinent: (1) the financialisation of farm households, namely the intensified
way in which individual farm households have become enmeshed in capital relationships,
most importantly via increasing amounts of debt; and (2) the emergence of land and water
as financial asset classes together with the recent entrance of institutional investors in both
areas. We discuss our findings with regard to the possible implications of future financedriven agricultural restructuring in Australia.
Finance capitalism: capital accumulation, shareholder value and everyday
In the decade following the publication of Fagan and Webber’s book in 1994, scholars of
economic restructuring, particularly in the USA and UK, turned their attention to the role
that finance capitalism was playing in processes of economic and spatial change. O’Neill
and McGuirk (2002) argued in this journal some 15 years ago that many of the economic
and spatial changes that had occurred in Australia up the late 1990s as described by Fagan
and Webber (i.e. deindustrialisation associated with the decline in manufacturing, the rise
in financial and business services sectors, growing economic disparity between regions and
sectors, the rise of the rentier class, and changes to modes of corporate governance) were
in fact consequences of an increasing ‘financialisation’ of the Australia economy. While
O’Neill and McGuirk’s (2002, 244) definition of financialisation focused on the shift in
corporate behaviour away from growing firm worth to maximising shareholder returns
(an important marker of financialisation), the rise of finance within the global capitalist
economy is arguably broader and more comprehensive.
Following van der Zwan (2014), the social science literature associates finance’s operation in the contemporary economy with three main processes: its increasing power and
dominance over processes of capital accumulation; the shift in corporate operations
towards increasing shareholder value; and its encroachment into everyday life. First, as outlined by both Arrighi (1994) and Krippner (2005), finance capitalism is marked by the shift
in advanced economies from a dominant focus on production and trade to accumulation
through financial means. This is a dual movement that involves, on the one hand, nonfinancial firms increasingly engaging in financial activities (at the same time making payments to the financial sector through interest payments, dividend payments and sharebuy-backs) and, on the other, financial firms continually extending the logics and discourses
of finance into the non-financial sphere. There have been a number of explanations for the
emergence of this new pattern of accumulation, including: an inherent accumulation crisis
within capitalism (McMichael 2012); increased international competition in manufacturing
due to the development of global markets and the subsequent withdrawal of firms from
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productive activity (O’Neill and McGuirk 2002); the empowerment of the rentier (functionless investor) class (van der Zwan 2014); and deregulatory and regulatory decisions by
national governments (Fuchs, Meyer-Eppler, and Hamenstädt 2013).
Second, as outlined by O’Neill and McGuirk (2002), within the finance-driven global
economy, shareholder value has become the predominant guiding principle for corporate
behaviour. Shareholder value is both a theory of corporate performance, where the shareholder is prioritised above all else in the firm, and a set of business practices that include
measures of financial performance and a short-term (normally quarterly) business outlook
(van der Zwan 2014). Consequently, shareholder value has meant a reorientation of firms’
financial gains, which are no longer re-invested in the company but distributed to
Third, there has been an encroachment of financial products, services, logics and discourses into everyday life, such that finance (in the broadest sense of the term) now ‘routinely organizes people’s work and everyday lives in ways beyond their possible control’
(Greenfield and Williams 2013, 104). Perhaps most critical here has been the normalisation and socialisation, en masse, of finance as part of everyday life, which has resulted in
individuals reconceptualising (parts of) their social roles and identities according to logics
of finance. For example, wage earners increasingly engage in financial products and services (so-called ‘mum and dad investors’); superannuation policies have transferred
(financial) responsibility to the individual (Wainwright and Kibler 2014); and governments now teach savers and borrowers to be ‘good’ financial subjects through programmes
on financial self-help, financial discipline, and financial literacy (Martin 2002; Langley
2008). In short, finance has moved from the ‘shadowy zone to daily routine’ (Greenfield
and Williams 2013, 103), redefining socio-spatial relations from the corporate level
through to the level of households and individuals (Pike and Pollard 2010).
All three processes outlined so far have shaped economic restructuring in the Australian
context to varying degrees. Decisions by successive federal governments to deregulate and
reregulate the economy have arguably been the key drivers of finance’s growing role in
the Australian economy. In line with the implementation of neoliberal policies (Pritchard
2005a, 2005b), the Australian economy has been developed into a hub for global finance
capital by substantially altering the regulatory protections and the creation of a host of financial instruments and vehicles to encourage capital inflows into the economy (Westcott and
Murray 2014). Core among these policies was the creation of compulsory superannuation in
the early 1990s along with the establishment of numerous superannuation funds. Moreover,
Macquarie Bank, one of Australia’s major banks, has emerged as the global leader in infrastructure investments, another area of ‘alternative’ investment (Torrance 2008).
At the same time—and as part of a broader move towards ‘self-responsibilisation’
within neoliberal culture and governance—finance has been ‘individualised’ together
with the implied agenda of transforming Australians into ‘financial subjects’ who perceive
themselves as (would-be) shareholders driven by the aspiration to seize opportunities for
investment (Greenfield and Williams 2007). Since the 1970s, Australia has seen a proliferation of financial magazines for the everyday investor, television shows dedicated to
finance, money, property investment and ‘flipping’, once-specialist but now mainstream
newspapers such as the Australian Financial Review, and government programmes to
expand the public’s financial literacy. The public’s desire for financial advice has been
met by media rhetoric espousing the ‘increasing significance of finance organisations,
services and products in people’s everyday lives’ (Greenfield and Williams 2013, 107). In
short, the Australian economy has been financialised on various levels, and agriculture has
not being spared, as the next section shows.
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From highly regulated to globalised agri-finance: tracing agri-finance
linkages in Australia since the 1950s
In comparison to other economic sectors, farming has long been regarded as a particularly
risky financial investment. As a result, private capital has generally been reluctant to invest
in farming without assurances from the state (Martin and Clapp 2015). The relationship
between agriculture and finance in industrialised contexts has therefore historically been
mediated by the state in various ways, including formalised policies to provide agricultural
credit, marketing boards to stabilise farmers’ incomes and creditworthiness, as well as
intervention in financial markets. During the 1980s and 1990s, the role of the state substantially changed, broadly in conformance with Peck and Tickell’s (2002) notion of
‘roll-back’ and ‘roll-out’ neoliberalism. While governmental influence on credit provisioning has been substantially reduced, the state has continued to shape the conditions under
which new agri-finance relationships develop and operate, most notably through provision of a regulatory framework. The state essentially played a mediating role in laying
the groundwork that has made agriculture particularly attractive to private financial
actors in recent decades (Martin and Clapp 2015, 8).
With respect to Australia’s agriculture sector, finance’s rise to prominence is a direct
result of the reregulation policies that began in the 1980s. Australia’s agricultural sector
was highly regulated prior to this time. Following the Federal Minister for Commerce
and Agriculture, ‘Black Jack’ McEwen’s 1952 landmark statement (which enshrined agriculture as the bulwark behind which the nation would industrialise and modernise its
economy), federal and state governments set about creating the appropriate institutional
and regulatory environment for farming to undergo its own credit-based intensification
and expansion. Early in the post-Second World War period, government intervention
in agricultural credit markets was relatively timid, limited to encouraging the private
major trading banks to lend to the farm sector on concessional terms. As part of its
package to stimulate agricultural investment, the federal government also introduced an
interest rate averaging requirement in 1956, which held farm overdraft interest rates
below the maximum market level (Bureau of Agricultural Economics 1972).
The farm sector, overwhelmingly comprising relatively small-scale family farmers, frequently struggled to access finance on terms suitable to their needs and conditions. Such
was the vital strategic importance of agriculture to the national economy, and such were
the governments’ concerns that farmers’ apparently unique requirements were not being
met by the private banking sector, that federal and state administrations intervened
directly in the farm credit market through the 1950s, 1960s and 1970s. From 1962, the
federal government introduced new long-term and concessional loan programmes for
farm development including the Term Loan Fund and in 1966 the Farm Development
Loan Fund. Both funds were marketed to the farm sector and administered by the
major trading banks (Hefford 1985). An even more powerful statement of the federal government’s ambitions regarding farm investment—and its concern that the private banks
might not be relied upon to be patient and enthusiastic conduits for the task—lay in its
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creation of the Commonwealth Development Bank (CDB) in 1959, and the Primary
Industries Bank of Australia (PIBA) in 1978 (Argent 2000). Arguably, these interventionist
measures reached their objectives with the proportion of medium- to long-term loans
steadily increasing through the 1960s (Hefford 1985). What is more, by the late 1970s,
publicly facilitated or sourced credit accounted for approximately 60 per cent of the Australian farm sector’s institutional debt, hence largely supplanting private bank credit
(which had accounted for around 70 per cent of all outstanding farm loans in the early
1950s) (Powell and Milham 1990).
As observed by Pritchard and Tonts (2011), the quest for so-called ‘market efficiency’
became a central element in farm trade strategy during the 1980s and helped lead to the
formation of the Cairns Group of agricultural free-trading nations in 1987. Since its formation, the Cairns Group has campaigned long and hard via the World Trade Organization (WTO) and related fora in support of trade liberalisation. It promulgated a mantra
derived from neo-classical economics and neoliberalism that the economic welfare of
farmers, together with the local and regional economies of which they are a part, is best
achieved through the efficient operation of agricultural markets. Here, ‘efficient’ was
defined as free, stripped of any trade-distorting producer subsidies or concessions (Pritchard and Tonts 2011). Echoing the experience of New Zealand as noted by Le Heron (1991),
the shift from state-supported to market-based agricultural policy in Australia in the 1980s
was not a sudden move restricted to agriculture but a general reorientation of state–
economy relations based primarily on neoliberal principles, namely increased competition, reduction of costs and greater flexibility. As a result, the macro-scale protective
regulatory apparatus was dismantled and agriculture, along with all industry sectors,
was exposed to the vicissitudes of an evolving global market system (Le Heron 1991;
Argent 2000). At the same time, Australian farmers saw average farm debts climb in
response to falling global commodity prices, rising interest rates and an unfavourable
floating exchange rate (Argent 2000).
In keeping with Global Restructuring’s historiographical perspective, these regulatory
changes ushered in a series of further policy and institutional shifts that, as they did for
other industries and their workforces, altered the rules of the game and, concomitantly,
completely recast the relationships between growers, governments, labour, quasi-non-government organisations, private capital, and domestic and international end-markets. The
term ‘restructuring’ is apt here not least because the legislative and regulatory changes
wrought to the Australian macro-economy and constituent industry sectors from the
early 1980s did indeed dramatically reshape the institutional and behavioural environments in which business owners, investors and workers operated. Throughout the
1980s and 1990s, reform-minded state and federal governments cut a swathe through
the public policies and programmes, such as concessional loans, that had hitherto supported farmers and farming.
As a result of these changes most forms of government intervention in the farm sector
were stripped out, creating space for corporate and financial-sector interests to take their
place where deemed potentially profitable (Pritchard and Tonts 2011). In particular, relative to the ‘long boom’ era, farmers faced a much wider choice of potential lenders and
loan products. With the arrival of 16 foreign banks into the Australian banking system
from 1985 (Pauly 1987) the domestic major trading and savings banks competed vigorously for business. Consistent with the neoliberal ethos of the time, the special conditions
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that had been woven into publicly funded farm lending programmes were gradually
stripped away, forcing farmers to seek out funding on fully commercial terms. Additionally, the major institutions and agencies that provided farm finance prior to deregulation
were progressively commercialised, privatised and/or abolished. For example, the Dutchbased agribusiness bank Rabobank acquired the PIBA in 1994, while the CDB was fully
privatised along with its parent, the Commonwealth Bank of Australia, in 1996 (Argent
2011). The small lenders of last resort attached to some state departments of agriculture
were also closed down, as their functions were no longer seen as needed in the new
private, deregulated environment (Argent 2000). As we show in the next section, this stripping back of state support for agriculture opened up new avenues for private lenders to
enter the agricultural sector, which in turn has forced farmers to develop a range of strategies to cope with the new financial landscape.
The construction of new farmer subjectivities
In the wake of the reregulation of the banking sector in the 1980s, public funding to marginal farms declined and the farm sector was exposed to private lenders, namely trading
and savings banks. As a result, lendership relations have swapped back again to mostly
privately issued debt. The share of farm debt held by private institutions expanded continuously throughout the 1990s, with private banks currently accounting for around 95
per cent of total institutional lending (Department of Agriculture 2015, 4). From the
1980s, banks developed and offered new and complex financial products—such as
foreign currency loans—for all businesses including farmers, but also more stringent
penalties for repayment problems. Farmers who wanted to stay on the land had to
develop sufficient financial and business nous in order to deal with increasingly predatory
lenders and aggressive creditors (Argent 1996; Lawrence 1999). As a result of the state’s
withdrawal, and under conditions of financialised capitalism, lenders were no longer
working to support the farming sector but were instead beholden to shareholder value.
Coinciding with these redefined farmer–lender relations was the increased pressure on
farmers to compete in global markets amidst the growing power of supermarkets (see,
for example, Lawrence 1999; Bryant and Garnham 2013).
Within the reregulated banking and increasingly globalised agricultural sector, high
and growing levels of debt have become a consistent feature of Australian agriculture
for the past two decades. With declining terms of trade reducing the profits that farms
can generate, bank debt has been the only option for many farmers to ‘get big’—which
they must do in order to generate sufficient economies of scale to remain productive
and competitive on national and global markets. Debt held by farmers has more than
doubled in real terms in the decade to 2009 (ABARES 2015, 43). Total indebtedness of
the agriculture, fishing and forestry industries rose 77 per cent between 2001 and 2009
from A$42.2 billion to A$74.7 billion (ABARES 2015). In 2015, average broadacre farm
debt was A$506 900, while the average dairy farm debt was significantly more at A$880
200 (ABARES 2015, 44). At the same time, although varying between sectors, Australia’s
farm debt is held mostly by a minority of farmers: while 83 per cent of dairy farmers had
more than A$100 000 debt in 2015, this was only the case for 47 per cent of sheep farmers
and 32 per cent of beef farmers (ABARES 2015, 48). Moreover, 70 per cent of debt in the
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broadacre sector is attributable to just 13 per cent of farms. As noted above, private banks
hold 95 per cent of this debt.
The growing debt in Australia’s farm sector has been a major cause for public debate in
recent years. In 2014, two Independent MPs raised a bill in the Senate to establish an
Australian Reconstruction and Development Board with the explicit aim of providing
greater financial resilience in the agricultural sector. While the bill was not passed, the
federal government responded to the so-called ‘debt crisis’ with a new round of concessional farm loans, a programme for a nationally consistent approach to farm debt
mediation and extension of financial counselling services for farmers (Minister for Agriculture 2014; Bettles 2015; Australian Government 2016). Given that a minority of farmers
hold the majority of debt, it is likely that the largest farmers with the highest value assets
hold the majority of this debt (as farmers can only borrow against the value of their assets).
This situation suggests that debt is not the same for all farmers but its role—as representing an existential burden or rather serving as strategic leverage to extend farm businesses
—depends on the farmer’s situation. In other words, debt has potentially been highly
advantageous for a certain proportion of the farming sector. However, the fact that
farmers have consistently argued that the eligibility criteria for accessing concessional
loans excludes those most in need of the loans suggests this is not the case for all
(Vidot 2015). Currently, public records do not give a clear indication of farm debt disaggregated by size. Financial literacy at the household level is likely to have played an important part in the success or otherwise of farmers navigating debt, although this is an area
that needs more empirical research.
In the post-financial crisis world, however, Australian farmers are increasingly being
forced to look beyond traditional forms of debt to fund their operations. In light of the
severe contraction of global financial markets in 2008, banks became more risk averse
and tightened their lending criteria (Ellis 2009). In the decade since the financial crisis,
farmers have thus faced a growing credit gap and are increasingly exhorted to pursue
alternatives to bank debt (Kingwell 2013). Specifically, farmers are being encouraged by
the state, peak farming bodies and economists to reach out to financial actors and to
enter into new forms of partnership with private equity providers, set up as joint ventures
or modern variants of share farming (ANZ 2012; Dairy Australia 2014; Marshall 2015;
Mohsin 2015; Cotter, Rochecouste, and Mohsin 2016; NFF 2017). Such partnerships
involve farmers forming alliances with private equity partners (i.e. private individuals
or institutional investors2) who, in return for injecting capital into the farm business,
take a financial, strategic and, in some cases, a management stake in the farm. For
example, in a previous study we note the case of a farmer who had entered into leasehold
arrangements with institutional investors in order to expand their holdings, in effect separating land ownership from the operation of the farm business (Sippel, Larder, and Lawrence 2017). In another example, Hawke and Clarke (2014) reported on the case of a dairy
farming family who sold a third of their holdings to a private equity investor as a way to
reduce their debt and expand productivity while the family continued to manage the land
on behalf of the investor. These models are argued to work simultaneously as a convenient
way to deal with challenges facing the sector, notably high levels of debt and the changing
age structure, as well as the need to raise capital to realise economies of scale, and higher
rates of productivity and efficiency.
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Engaging in partnership with private equity providers arguably requires a substantial
transformation in farmers’ mentalities, including essential aspects such as the perception
of farm ownership structures, farm management strategies, and ways of self-identification.
Farmers must abandon the positive valuation of ‘owning their land’ and reconceptualise
land as something they work on but do not necessarily own. At the same time, farmers
must transform themselves not only into entrepreneurs but also into ‘investors’, a transformation that is advanced in campaigns jointly undertaken by industry and government
bodies and promoted at agribusiness events. One example is a checklist explaining to
farmers how to become ‘investment ready’ in order to ‘boost farm productivity, gain a
competitive edge, and exploit new opportunities to grow’ provided by Dairy Australia
and the state government of Victoria (Dairy Australia 2015). Here, the ‘better farmer’
leading the future is posited as one who not only understands and strategically plans
their position within global markets but who also seizes global investment opportunities
and incorporates the needs and values of their financial partner. This emerging farmer
ideal fits neatly into the agenda of actively forming, and shifting, economic and finance
rationalities for the Australian citizenry (Greenfield and Williams 2007) and the creation
of investor subjects under neoliberalism (Langley 2008; Hall 2012).
In sum, the retreat by the state, rising debt levels and tightened lending criteria for
farmers are resulting in a financialisation of farm households on three levels: farmers
have become enmeshed with global financial circuits via increasing amounts of debt
from private lenders; new farmer–investor relations are emerging that are being promoted
as alternative ways to access equity capital; and new farmer subjectivities are being constructed where farmers not only need financial literacy to run their business but are
required to conceive of themselves as investors in relation to their farm. The redefined
role of finance so far examined with regard to farm households coincides with a reconceptualisation of the two key farming assets—land and water—under an increasingly financialised agricultural sector. These are examined in the next section.
The construction of alternative asset classes based on ‘nature’
In recent years, nature has been subjected to finance’s reimagining. All things nature—
such as land, water, carbon and weather—are providing the basis for new financial
asset classes termed ‘alternative’, deviating as they do from the more traditional financial
assets of stocks and bonds. A financial asset here refers to anything that generates a positive cash flow. Based on, but distinct from, commodification, the transformation of things
into revenue-generating and tradable resources can be captured as a process of ‘assetisation’ (Birch 2017). This process includes liquefying, (e)valuation and standardising practices (Ducastel and Anseeuw 2017; Visser 2017). Moreover, it requires that the object in
question has the potential to generate profit, is (considered as) scarce and that its treatment as an asset, as such, is perceived as legitimate. All these elements are embedded
within the wider context of state regulation needed to facilitate these requirements.
While Leyshon and Thrift (2007, 100) argued that finance seeks ever more unorthodox
asset streams for raising investor capital, the return to the ‘real’ by institutional investors in
the last decade suggests that financial logic has cycled back to ‘tangible’ assets, a phenomenon that seems to be particularly tied to moments of crisis. Intensified by the financial
crises since 2008, and as a response to the poor performance of ‘traditional’ asset
classes, financial institutions have come to view ‘real assets’ as profitable investments
(Aalbers and Christophers 2014; Loftus, March, and Nash 2016). At the same time,
there are barriers to the ‘assetisation’ of nature, partly grounded in the characteristics of
‘nature’, such as the seasonality of production cycles or the inherent risks due to
weather events and pest attacks (Kuns, Visser, and Wästfelt 2016). Below, we outline
how and based on which mechanisms finance capital has become involved with two
‘real assets’ in rural Australia—farmland and water—and discuss some of the barriers
that have been faced in this context.
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Farmland as a financial asset class
The movement of finance into agricultural land has arguably been the most extensively
studied aspect of financialisation of the agri-food sector, as part of, and emerging from,
the broader ‘land rush’ literature (see, for example, Fairbairn 2014; Ouma 2016; Ducastel
and Anseeuw 2017; Visser 2017). Australian farmland has played an important role in this
context, resulting in a substantial change in how farmland is managed and owned in the
light of emerging new players, mechanisms, and logics. While recent investments are distinct in how they respond to a specific situation of crisis in 2007–08, in terms of perceiving
farmland and farming as an opportunity for financial investment they are not the first of
their kind. In this section we take a longer view of the winding paths of investment in Australian agriculture to trace the assetisation of farmland (and farming) within the Australian context prior to 2007–08 before discussing some of the more recent trends and
implications of financial investments.
While there has been no systematic evaluation of finance’s engagement in Australian
agriculture prior to the 2000s, the New Zealand case is potentially instructive for Australia
given the similarity between the two countries’ agricultural sectors. As Le Heron (1991)
documented in the case of New Zealand, following withdrawal of state intervention
from agriculture, finance capital from Australian and New Zealand institutions entered
the New Zealand agriculture sector in the 1980s in various ways. These investments
included new company listings that invested in non-traditional livestock (deer and
goat); syndicated private land purchases; purchase of land by rural property trusts
financed by superannuation funds; and significant investment in listed food and fibre
companies by insurance firms, finance and investment companies and banks. The
extent to which Australian agriculture was shifted into financial markets during the
period is not clear as Le Heron (1991) only examined the situation in New Zealand.
Three examples noted by ISA (2017) further illustrate institutional investment in Australian agriculture during that period. AMP Limited, a financial services company, wholly
owned the beef producer Stanbroke as early as the 1960s and, with 27 properties and
some 500 000 head of cattle, represented the largest landholder in the country. Similarly,
the Prudential/Colonial Agricultural Fund was a major cattle investor during the 1980s
and 1990s. Lastly, the insurance company National Mutual had investments of some A
$200 million in cotton and wheat production in the 1980s. In all cases, however, assets
were sold in the late 1990s and mid-2000s, as the financial performance of the businesses
was not regarded satisfactory.
By the 1990s, in addition to institutional investments, opportunities for retail investors
to invest in agriculture were developed. Between 1960 and 1990, households in Australia
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dramatically shifted their savings strategies away from bank deposits and in to investment
products as everyday life became financialised (Mees, Wehner, and Hanrahan 2005).
Households invested primarily in so-called managed funds3 as part of the broader political
shift that sought to make Australia into ‘a nation of shareholders’ (Howard in Greenfield
and Williams 2013, 108). With respect to agriculture and forestry, managed investment
schemes (MIS) were designed to allow sufficient scale of investment in agriculture, seen
as necessary for achieving low-cost production (SERC 2016).4 Various companies used
pooled funds from retail investors to purchase land and establish and manage production
of, primarily, forestry timber but also almonds, olives (for oil), wine grapes, macadamia
nuts and citrus fruits among others (SERC 2016). With an estimated A$5 billion invested
by around 75 000 investors between 2005 and 2009, significant amounts of finance flowed
into agricultural land through MIS (SERC 2016, 23).
Following the global financial crisis in 2008, however, four of the largest agribusiness
MIS collapsed—namely Timbercorp, Great Southern, Willmont and Gunns—leaving
thousands of retail investors suffering substantial financial losses. A Senate report identified a bundle of factors that contributed to the collapse of the schemes, including high
upfront costs, poor management decisions, problematic business structures, lag time
between initial investment and dividends, as well as failures at the level of implementing
the policies applying to agribusiness MIS (SERC 2016). All these factors were both a result
of, and further compounded by, the financial crisis. Agriculture thus emerged as an investment opportunity that was offered to retail customers at a broader scale during the 1990s
in the form of schemes that supposedly delivered reliable and secure income streams, but
eventually turned into one of the largest investment scandals in Australia’s recent history.
Since 2009 and the collapse of many such MIS, this model of agricultural investment
has largely given way to an institutional investment model once again. The 2008 financial
crisis played a crucial role in this shift in two ways. First, the crisis was a critical factor in
exposing and accelerating the failure of agribusiness MIS; and second, the collapse of the
schemes freed up large properties thereby creating investment opportunities for those—
now, however, mostly offshore—institutional investors who were driven away from the
kind of speculative assets that had led to the financial crisis and who were turning
towards real assets, including agriculture. For example, the forestry holdings of Great
Southern Plantations were acquired by a Canadian pension fund (Alberta Investment
Management Corporation) together with an Australian and New Zealand forestry
sector fund (Welsch 2011). Emerging against the backdrop of the global food and financial
crises of 2007–08, the current inflow of overseas institutional finance capital into Australian farmland has thus been driven by a specific constellation of global mechanisms, with
Australia fulfilling a number of criteria deemed positive from investors’ perspectives.
Three key drivers have underpinned the post-2008 financial interest in farmland: (1) the
poor performance of traditional asset classes (as outlined above); (2) neo-Malthusian arguments concerning the finite availability of land simultaneous with a rising global demand for
food; and (3) its currently perceived positive attributes as a form of financial portfolio diversification and hedge against inflation (Larder, Sippel, and Lawrence 2015). According to
financial theory, returns on farmland comprise two parts: the income return, defined as
the portion of the farm revenues or profits attributed to the land as opposed to labour
and management; and the capital return as the change in the market value of the land
year-to-year (Painter and Eves 2008). In this way, farmland is seen as being both a
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productive and an appreciating asset class (Fairbairn 2014). Based on these calculations,
income streams can be constructed in various ways, combining (anticipated) land appreciation and returns gained from associated production in a so-called ‘own-operate’ model; or
based on (anticipated) land appreciation and rent (received from leasing out the land) in an
‘own-lease out’ model. In reality, models are often combined or adapted in creative ways.
For Australia specifically, we can identify five key reasons why farmland has been constructed as a valuable investment within the context of (assumed) ‘global farmland
markets’: (1) the nation’s relatively stable political system along with its strong interest
in securing foreign investment; (2) a technologically sophisticated agricultural sector
located in the southern hemisphere (suitable for counter-seasonal production and offering
diversification potential); (3) agricultural policies supporting non-subsidised, free-market
and export-oriented agriculture; (4) the nation’s strategic position in relation to emerging
(notably Asian) markets and opportunities in the context of Free Trade Agreements; and
(5) a considerable appreciation in land values since the early 2000s. In short, investments
have been especially motivated by an assumed highly profitable low-risk investment
environment, setting Australia apart from other global investment contexts, which is
largely a result of ongoing neoliberal economic and financial restructuring along neoliberalist/‘free-market’ and productivist lines.
While there are no official data on the total amount of finance capital invested,5 it is safe
to say that farmland investment firms and finance-backed companies have become important players in Australian agriculture, with an estimated amount of at least some A$3
billion of investments stemming mostly from overseas (Magnan 2015). With some exceptions, Australian superannuation funds have been more reluctant in their investments,
which is due partly to their strained history of investments as outlined above.6 Among
the largest players are the Westchester Group of Australia, a subsidiary of Westchester
Agriculture Asset Management (which has been acquired by the US American financial
services company TIAA-CREF (Teachers Insurance and Annuity Association—College
Retirement Equities Fund)) in 2010 and the agricultural funds that have been set up by
the Australian based Macquarie Group. In addition to the substantial amount of capital
invested and the large areas of land owned and/or managed, the importance of these
players lies also in their impact on the farmland market in terms of price developments
and further consolidation of land ownership as well as in their multiple interactions
with farmers and rural communities on various levels (Sippel, Larder, and Lawrence
2017; Sippel, Lawrence, and Burch 2017).
A further preliminary observation is that contrary to the often-presented rhetoric of
investors’ ‘long-term’ interest in agriculture, finance-driven farming operations are not
necessarily characterised by great stability. A prominent example is the case of
PrimeAg, a listed company launched in 2008 that started to wind down and sell off
its portfolio in 2012 after less than 5 years of operation (Magnan 2015). Among the
reasons were unfavourable climatic conditions, severe floods, and price volatility. In
addition, directors mentioned that the global financial crisis of 2007–08 undercut confidence in the venture. In 2013, the company’s portfolio was sold to two other financial players (the US pension fund TIAA-CREF and the Australia-based Laguna Bay); a
third part went to Australian Food and Fibre, a previously listed but, since 2007, privately held company and former shareholder of PrimeAg (Plunkett 2015). Another
example of a relatively quick turnover cycle is the Macquarie Group’s almond fund.
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Originally planned with a timeframe of 22 years, the fund was closed in 2015 and the
940 ha of almond orchards that were licensed to investors in the form of MIS, together
with water entitlements worth some A$25 million, were sold on to a Canadian pension
fund and a US-based investor (Adviser Edge Research 2011; Cranston 2015).
In sum, farmland and associated farming operations have been considered as investment opportunities since the early 1960s against the backdrop of state policies fostering
neoliberal restructuring and the normalisation of finance on the one hand and dynamics
of global crises on the other. Finance capital has thus been part of the Australian agricultural landscape for decades but has historically seen only limited success in the best cases,
and large losses and failures in the worst. While the implications of the more recent revival
and intensification of financial investments need further investigation, these investments
show that, despite the various challenges involved, investors have a sustained interest in
establishing farmland as an asset class delivering reliable income streams. Financial investors are thus likely to become key drivers of future landownership changes.
The emergence of rural water as financial asset
Alongside neoliberal policies to restructure the finance sector, marketisation of water
policy and subsequent commodification of water have been critical in underpinning the
socialisation of finance in respect to water for agriculture in Australia. Unlike land,
which has been subject to processes of marketisation since the beginning of European
settlement in Australia, the appropriation of water for the market is a more recent
phenomenon (Bakker 2005). In Australia, water’s marketisation has been driven by a
desire both to develop the agricultural sector and, more recently, as a mechanism under
the neoliberal model of governance to deal with environmental problems and water scarcity. While the effectiveness of the water market in dealing with these issues is questionable, the establishment of a mature water market has worked as a precondition for the
current assetisation of water. To date, the water dimension in discussions on financialisation has been restricted mostly to studies of urban and drinking water provision (Bayliss
2014; March and Purcell 2014; Bresnihan 2016), and only poorly covered in the literature
examining financial investment in the agri-food sector (although see Franco et al. 2014).
Beginning in the 1960s, government policy for water management characterised water
as a resource to be measured and managed to fuel expansion of Australia’s agricultural
sector and grow regional Australia (Bell and Quiggin 2008). However, by the 1980s,
growing environmental concerns around ongoing water scarcity saw policy shift away
from government-controlled allocation of water towards market-based management.
This shift was in line with broader neoliberal and reregulatory sentiments at the time,
which argued that markets were best placed to solve environmental problems surrounding
water and its management. Market-based approaches were applied to waterways and riversheds around Australia but it has been in the Murray-Darling Basin (MDB), Australia’s
largest river system and main food-producing region, that the roll-out of marketisation
has been most significant.7 Marketisation of the MDB—essentially the creation of a
market to manage water use—first occurred in 1994 when the Council of Australian Governments signed the Strategic Framework on Water Reform, which established a system of
tradable water property rights as the central element of the reform process (Bell and
Quiggin 2008). In 2000, 20 of the 23 river valleys within the Basin were in poor to very
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poor ecological condition (MDBA in Alston et al. 2016). By 2002, the MDB was at the
beginning of a 10-year drought, known as the ‘millennium drought’ and the health of
the system was declining further. Dibden, Potter, and Cocklin (2009) have stated that agricultural policy in Australia cannot see perspectives outside of neoliberalism and the same
is true for water management: despite the fact that almost a decade of market-based
approaches to river health had failed to improve environmental health, the marketoriented model was continued with the release of the market-based National Water
Initiative programme in 2004 (Bell and Quiggin 2008).
Today, the trading of water in the MDB is complex. The vast majority of the MBD is
devoted to rain-fed agriculture, which covers 98 per cent of the Basin’s surface area, with
just 2 per cent of the Basin taken up by irrigated production (Quentin Grafton et al. 2014).
Unsurprisingly, it is irrigated production that consumes the majority of water extracted
from the Basin and diverted for non-environmental flows, with around 90 per cent of
this extracted water going to irrigated pasture for dairy, beef and sheep, rice, horticulture
and cotton (Quentin Grafton et al. 2014; Quentin Grafton, Horne, and Wheeler 2016).
The federal government is responsible for managing the Basin’s multiple water markets,
including determining the appropriate allocations for the environment and irrigators
based on the government’s own water entitlements and holdings (Quentin Grafton,
Horne, and Wheeler 2016, 918). This allocation is essentially the ‘cap’ in the so-called
‘cap and trade system’, which represents the total water available for consumptive use
in the system (MDBA 2015). The market is underpinned by both financial and physical
elements, namely water rights in the former and a system of rivers, storage dams, weirs,
channels and pressurised pipes in the latter (MDBA 2015; Quentin Grafton, Horne,
and Wheeler 2016). Water rights are organised in a double-layered system (BoM 2017).
‘Water entitlements’ create a perpetual access to a certain share of water from a specified
consumptive pool, the ‘cap’, depending on seasonal availability as determined by the state
and territories. The specific volume of water that is allocated to a user in a given season is
referred to as ‘water allocation’. Both entitlements and allocations are tradable within
defined spatial areas.
While the marketisation of water does not appear to have improved environmental outcomes for the MDB (Bell and Quiggin 2008; Dayman 2017) it has, however, created a new
avenue for investors seeking financial returns. In the last decade, institutional investors
have become new players in the water market in addition to the main historical market
players, irrigators and the government (Quentin Grafton, Horne, and Wheeler 2016).
Institutional investment in water currently occurs through asset management firms
such as Blue Sky Alternative Investment Limited and Kilter Rural, which purchase
water entitlements using funds from investors (Blue Sky 2017; Kilter Rural 2017). These
entitlements are then leased to water users, thereby creating an income stream to investors
based on the lease-incomes that are generated. This is basically the adaptation of the ‘ownlease out’ model (as outlined above) to the case of water. Based on considerations regarding the increasing scarcity of water, the progressive transfer of water usage from lower to
higher value production, and productivity growth in irrigated agriculture water entitlements it is further anticipated that water entitlements will appreciate over time and
deliver long-term capital growth. Moreover, funds argue that they provide important
new sources of equity in regional Australia, which, as outlined above, is increasingly a
topic of public discussion given the high levels of debt among Australian farmers.
To conclude, the establishment of a water market in rural Australia has not only effectively decoupled land and water, which can now be traded separately, but also has contributed to the construction of water as a financial asset based on fundamental principles of
scarcity and growing demand for agricultural produce, which sustain the value of the asset.
As in the case of land, the extent to which institutional investors have acquired ownership
of water entitlements is unclear, as are the effects of this process on the water market.
Importantly, however, as this section has demonstrated, governments have again played
a crucial role in establishing and setting the regulatory conditions for this process.
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There have long been arguments that Australian agriculture was ‘left behind’ in the financialisation of the economy that occurred in the 1980s and 1990s (see, for example, Dwyer,
Lim, and Murphy 2004). Taking up Fagan and Webber’s global restructuring thesis and
extending it to agriculture, this paper demonstrates that agriculture has indeed become
subject to a comprehensive process of finance-driven economic restructuring over
recent decades. In doing this we ground the intensified financialisation of agriculture
observed by numerous scholars since 2008 within prior historical developments. Importantly, we have stressed the paramount role that governments have played in redefining
agri-finance relationships in Australia by promoting and providing the regulatory framework for processes of marketisation and assetisation, thereby making agriculture attractive
to subsequent financial investors. In other words, finance does not operate on its own and
the state has a crucial role in incentivising and setting the conditions for finance capital.
Regulatory changes since the 1980s have resulted in an agricultural sector where finance’s
growing role is normalised as a part of the sector’s operation. The intricate entanglement
of the Australian economy and its agricultural sector with a globalising financial system
and its recurring crises has further shaped this process.
Following the historical sketch we examined two particularly pertinent areas of intensified agri-finance relationships: the farming household level and its enmeshment with
increasing amounts of privately provided debt on the one hand, and the level of the assetisation of the two vital farming prerequisites, land and water, on the other. With regard to
land and water, we have argued that both have been subject to (early) financial assetisation
since the 1960s in the case of land and in more recent years in the case of water. Within
this process, both needed to be conceptualised as ‘property’ and commodities along with
the establishment of functioning markets as a prerequisite for the creation of income
streams for investors. This means that, conceptually, farming assets have been decoupled
from one another to become separately tradable not only as commodities but also as assets.
Although occurring with different temporalities and based on different mechanisms, institutional finance capital has acquired both land and water rights ownership in recent years
to an extent that to date remains largely unclear.
At the household level, a proportion of farmers have arguably been disciplined through
30 years of debt and exposure to global markets to perform as financial subjects. This
paper argues that there is a growing expectation on farmers to manage the complexities
of financial decision-making and seek out ever more complex (and potentially risky)
financing arrangements when traditional bank debt dries up. For those unable to
perform as ‘good’ financial subjects, debt finance dries up as banks tighten lending criteria
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and the state restricts concessional loans to ‘viable’ operators. The changed financial landscape is arguably moving Australian agriculture towards a model that promotes and incentivises alternative models of capital raising for farmers, one that relies less on debt
financing and more on private equity and institutional investment models, and an
agenda that neatly fits with the assetisation of land and water. At the same time,
smaller, less viable operators are increasingly excluded from both traditional as well as
alternative models of financing.
With regard to the potential implications of these processes, we want to emphasise two
points in relation to farm differentiation on the one hand and shifting responsibilities on the
other. Based on processes of farm differentiation in Australia over the past three decades we
first suggest it is likely that we will see an ongoing differentiation in the farm sector along at
least three lines. First, the large number of so-called small, lifestyle or hobby farmers operating in high-amenity regions are likely to remain largely unaffected by the entrance of
private equity and institutional investors or changes to bank lending criteria; their size
means they will likely go unnoticed by investors and their nature suggests they will continue
to operate as small farms without seeking to expand. Second, there is the group of ‘corporate
family farmers’ that have been described as farm family entrepreneurs by Pritchard, Burch,
and Lawrence (2007) . Drawing on ongoing research in this area we suggest that these are the
operators potentially in the position to capitalise on the current wave of private equity and
institutional investment. These actors are likely to be those that hold the majority of debt but
due to their size and financial literacy will be more adept at managing the risk of greater
engagement with financial actors. Finally, there is the large group of farmers who represent
the ‘middle’. These are the majority of farmers who seem to be trapped by small amounts of
debt while being unable to quit farming because their holdings are not attractive to potential
buyers. As one farmer commented to Bryant and Garnham (2013, 7) ‘Well how do we get
out of it? … We’ve already been to the real estate to see whether it is an option to sell, but
they’re saying no because there’s no one out there that wants to buy.’ Moreover, because
of their status, ironically, they are unable to access contemporary concessional loans
funded by the federal government, which are only open to ‘viable’ operators. Further
research in this area is needed to understand the lived realities behind farm debt statistics.
What is more, we see a need to reflect upon how responsibilities are being redefined as a
result of the processes outlined in this paper. Two key responsibility shifts emerge from
our analysis. On the one hand, responsibility is shifted to individual farmers given that
under the ‘normalised financial culture of neoliberal practices and assumptions’ (Greenfield and Williams 2013, 108) the cause of non-viability among farming households
(repossession by the bank) lies with the farmers themselves, who fail to secure their
own well-being through further debt-driven expenditure in the first instance and increasingly private equity when the banks stop lending. On the other hand, societal responsibilities are being shifted to the market represented as the alleged ‘neutral’ mechanism leading
to most desirable outcomes. Within the context of sustained neoliberal restructuring this is
not a new process, as such. However, as demonstrated in this paper, markets are increasingly driven by financial motives and rationales which are effectively redefining the way
agricultural value and assets are being constructed. There is hence the need to examine
the implications and shifting responsibilities resulting from intensified financial marketisation within the broader context of global restructuring.
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1. Larder and Sippel started working on the topic within the context of the Australian Research
Council-funded project ‘The New Farm Owners: Finance Companies and the Restructuring
of Australian and Global Agriculture’ (DP 110102299) led by David Burch and Geoffrey
Lawrence, where Larder was a research assistant and Sippel was an affiliated researcher.
Since then, collaborative work of all three authors has continued within the context of
further research grants located at the Universities of Leipzig, New England and Queensland
(see the Funding section for funding details).
2. Two main categories of investors are usually differentiated: institutional investors such as
mutual funds and superannuation funds that invest on behalf of their customers; and
retail investors, which are individuals who invest their personal money. Retail investors typically invest much smaller amounts than institutional investors although high-net-worth individuals may invest at levels closer to institutional investors than the average retail investor.
3. Managed funds, also known as pooled or collective investments, generally involve a large
number of investors (the majority being retail investors) pooling their money to invest in
a range of financial and retail assets that may include agricultural and forestry schemes,
property trusts, international equity trusts or managed strata title schemes. The pooling
of small of amounts of capital from many households creates sufficient scale to allow
retail investors access to investment products they would otherwise not have sufficient
capital to engage in. Managed funds in Australia were regulated in 1998 under the Corporations Act (2001), which designated managed funds ‘managed investment schemes’
4. Australia-based MIS that invest in agriculture, also known as agribusiness MIS, are not the
same as farmland-focused real estate investment trusts (REITs) as discussed by Fairbairn
(2014). Beyond the different legal and taxation frameworks that govern them, the main
difference is how returns are generated for investors: with REITs, investors gain returns
from any increase in value in the underlying real estate asset and regular rental income generated from the assets, while in agribusiness MIS returns for investors are generated through
production of forestry or agricultural products rather than land rent. From the perspective of
investors this is an important difference because REITs are likely to generate returns at once
compared to MIS where investors can be waiting for years for a return on their investment.
5. ‘Finance capital’ is not a category that appears in official Australian farm(land) ownership
statistics as provided by the Australian Bureau of Statistics; moreover, companies and government institutions often withhold information.
6. It should be noted, however, that various (political) actors have recently called for the
increasing engagement of Australian superannuation capital in Australian agriculture
(Sippel forthcoming).
7. The Murray-Darling Basin is responsible for 95 per cent of Australia’s water market activity
(MDBA 2015).
We thank the two anonymous referees of Australian Geographer for providing helpful comments.
Disclosure statement
No potential conflict of interest was reported by the authors.
The research presented in this paper has been supported by three research grants at the Universities
of Leipzig, New England and Queensland (DFG-funded research project C04, SFB 1199; DAAD-
funded Australia–Germany Joint Research Cooperation Scheme; and ARC Discovery Grant DP
Neil Argent
Nicolette Larder
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