Duxton Broadacre Farms is an Australian listed entity providing investors with exposure to a diversified portfolio of high-quality, efficient, Australian farms

DBF NAV $1.76
Change   Fair Market NAV Per Share as at 30 June 2019

Duxton Broadacre Farms Limited ("Duxton Broadacre" or "the Company") is an Australian listed entity (ASX:DBF) providing investors with exposure to a diversified portfolio of high-quality, efficient, Australian farms.

Access to a well-established portfolio of operating broadacre farms producing a diverse range of agricultural commodities.

Best in-class, on-farm management, strengthened by the global agricultural experience of the Investment Manager, Duxton Capital (Australia).

Risk is mitigated and returns optimised through mixed commodity production, long-term water security, geographic diversification and the strategic development of properties.

Duxton Broadacre Farms continues to seek land-rich parcels for continued growth, scale, and diversification.

SQM Research rates Duxton Broadacre Farms 4 stars high investment grade
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Duxton Broadacre Farms is an Australian listed entity providing investors with exposure to a diversified portfolio of high-quality, efficient, Australian farms. Australia presents a unique investment opportunity in this space because of the low-sovereign risk and potential for value uplift. To ultimately decide on Australia as the location for this Company, Duxton Capital Australia, being the Investment Manager, looked at some of the world’s largest wheat producers, who in aggregate, produce around 520 million tonnes of wheat each year.

Using various different measures of economic and sovereign risk, we narrowed the list down:

The USA

Canada

France

Germany

And Australia

Using Savills’s 2018 global farmland index data, we then analysed these and other countries, and compared them in terms of the capital cost of gaining farmland exposure in these countries. Let’s say you have $100 million US dollars to invest.

For this, you could buy…

9,799 hectares in America

4,286 hectares in New Zealand

3,533 hectares in Germany

4,150 hectares in the UK

and an incredible 43,403 hectares in Australia

Land in Australia is incredibly well priced, but is it comparatively productive? 

We assessed this by benchmarking the capital cost required, to purchase enough land, to produce the same 1 tonne of wheat, year-on-year.

To do this, it would cost you…

$3,305 US in America

$2,978 US in the UK

$3,595 US in Germany

$2,607 US in New Zealand

But only $1,329 US in Australia

You can see why we saw opportunity to farm in Australia given the low sovereign risk, and the mis-priced land. Now the next question is do higher operating margins outside Australia justify higher land values – the short answer according to a 5-year study conducted by the Grains Research and Development Corporation.

So, you have invested your $100 million US and bought land in these, each of which provides a different level of production. Your $100 million deployed into Australian farmland based on average production will produce approximately 85,000 tonne year-in, year-out.

In Germany, your $100m converts to 28 thousand tonnes. In New Zealand, your $100m converts to 38 thousand tonnes. In the UK and the US, your $100m converts to 33 and 31 thousand tonnes respectively.

Now using the data from the GRDC study we have multiplied this by local average farmgate prices per tonne, to calculate revenue per annum, and by average cost of production per tonne, to ultimately arrive at an annual operating profit. In Germany, your $100m should convert to approximately $2.1 million of annual operating profit. In America, its only $2.2 million. In the UK, it is about the same, at $2.5 million.

Whereas in Australia, you $100 million US dollar capital investment converts to a year-on-year operating profit of around $6.2 million, assuming average prices and costs.

The Company therefore recognises potential for capital growth in the underlying land assets of the aggregations. Based on historical data, we also believe grain prices are at the bottom of the cycle, sitting near all-time low inflation adjusted prices. There are a number of catalysts which are anticipated to provide strong upward pressure on the commodities produced by Duxton Broadacre and teamed with potential up-lift in local land values, this should result in stronger returns for investors over time.

Our Properties

Duxton Broadacre owns and operates two major geographic aggregations. The aggregations are located in NSW, between Forbes and West Wyalong; and in South Australia, near Naracoorte.

These properties are comprised of dryland and irrigated land, producing a diverse range of both summer and winter crops.

This Month on the Farm

Cotton planting that was scheduled to occur at the end of September was delayed due to cold weather. The planting occurred in October and has established well. The small trial plot of cotton under a fully biodegradable/dissolvable film is developing well and will be monitored during the season. The film essentially results in a greenhouse effect that assists in retaining heat in the soil promoting early development of the cotton seed. This facilitates a longer growing period to maximise yield.

The irrigated cereal crops are finishing well despite the difficult conditions throughout the year. Harvest of the earlier planted barley is expected to commence in early November. Crop conditions are continuing to be closely monitored with suboptimal areas being opportunistically cut for hay or grazed by livestock to maximise return.

DBF continues to maintain adequate reserves of fodder for livestock to facilitate the ongoing fattening and wellbeing of stock. Areas of wheat that were anticipated to produce suboptimal yields due to the dry conditions have been utilised for grazing. New pasture planting areas have benefited from intermittent rain events. The sale of stock continued over the month with favourable livestock prices continuing. Additional stock are being purchased as opportunities arise.

Despite lower rainfall in October along with hot and windy conditions,crops are still expected to achieve forecasted yields. In some areas pasture growth has been adversely impacted by hot conditions. Cutting hay and canola will take place in early November. Due to the hot conditions harvest is expected to be two weeks ahead of schedule. Despite the hot conditions, cattle and lambs have developed well throughout the season and are in exceptional condition. Marketing of lambs commenced during October and will continue over the coming months.

The rollout of the irrigation development program continued over October. The irrigation development projects are aligned with the Company’s broader risk mitigation strategy by seeking to increase water security, visibility and operational flexibility. The newly built storage and channel systems have been utilised this month to water the cotton crop. The new irrigation infrastructure will ensure that the cotton crop is watered with improved efficiency this season. A new bore motor will be installed to ensure the bore is functioning efficiently for the cotton season. The successful production bore at Walla Wallah has had an application lodged with State Water and is awaiting approval. The hydrological survey at Timberscombe has continued during the month to identify areas that may be potential locations for further production bores.