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…

$3,221 US in America

$3,217 US in the UK

$3,109 US in Germany

$2,621 US in New Zealand

But only $1,079 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

Rainfall deficit throughout NSW has provided challenging conditions for winter crops, with rainfall over the coming weeks crucial for achieving positive yields. Irrigated cereal crops have received irrigation to assist early development. A cotton trial is in planning stages, which will see the crop planted under a biodegradable film. This intends to promote early development of cotton seed, facilitating an longer growing period to maximise yield. Boorala has seen a mild and not overly wet winter, resulting in good pasture and crop growth. Livestock has shown excellent early development due to the quality and quantity of feed on hand.

The ongoing rainfall deficit experienced throughout the NSW winter cropping season is resulting in diminishing prospects for the NSW winter crop. Rainfall over the coming weeks will be crucial for achieving positive yields. Crop conditions are being closely monitored during this period with suboptimal areas being opportunistically cut for hay or grazed by livestock to maximise return. Sales of on-farm stored grain continued over August in line with the commodity marketing strategy. Irrigated cereal crops received irrigation in August to assist with early development.

Preparations have been completed for the planting of next year’s cotton crop. The Company is going to trial a small section of cotton planted under a biodegradable film. 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 ongoing rollout of the irrigation development program continued over August. 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 second storage facility at Walla Wallah is being filled in preparation for the upcoming cotton crop. 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.

DBF continues to maintain adequate reserves of fodder for livestock to facilitate the ongoing fattening and wellbeing of stock. Areas of wheat that do not look likely to produce grain due to the dry conditions are being utilised for grazing. The sale of stock continued over the month with favourable livestock prices continuing.

A relatively mild and not overly wet winter has resulted in good pasture and crop growth. Between the development of the pasture and a strong crop Boorala has an excess of feed. To take advantage of the excess feed angus steer have been purchased. The angus steers have already started to gain weight and will be sold once they reach appropriate market weights. Young lambs have shown excellent early development due to the quality and quantity of feed on hand.