Farmland Partners, which has grown in less than two years into one of the biggest US farmland owners, is preparing for acquisitions abroad, amid a drive to increase its assets to some $2bn over the next five years.
The Colorado-based company - which has expanded its portfolio from a little over 7,000 acres at its flotation in April last year to more than 100,000 acres including a $31.8m acquisition this week – said it would continue to focus its expansion in the US.
With some $30bn of US farmland changing hands each year, "there is no limit to the scale we can achieve" in the country, Paul Pittman, the Farmland Partners chief executive, said.
However, it is intending expand abroad too, in an attempt to diversify its portfolio, and is already keeping a close eye on the Australian market, Mr Pittman told Agrimoney.com.
A primary criteria for countries on the short-list for investment is "iron clad property rights", Mr Pittman said.
However, Australia in particular looks appealing as a "big market", offering easier scope for purchases, and thanks to its proximity to Asia, a key importer of agricultural commodities.
Australia, a major exporter of the likes of wheat, beef and wool, is "probably the geography best placed for benefiting from Asian demand growth," given its proximity to importing countries such as China and Indonesia.
While Farmland Partners' land portfolio is currently confined to cropping farms, Mr Pittman said that "we will probably try to work out some way to get into protein" to exploit Australia's pre-eminence in meat exports.
Indeed, Mr Pittman stressed the "diversification" that buying abroad would give Farmland Partners, although acknowledging the climatic risk that has historically dogged much Australian farmland.
"We would be looking to buy in the wet quadrant of the country," he said, adding that there was "a lot of irrigated land", and with Australia boasting a "very transparent" water market.
Other target countries could include New Zealand, although this is "obviously a much smaller market" than Australia, and Canada.
However, "we do not get a large diversification away from the US" by buying in Canada, Mr Pittman said, on the sidelines of the Global AgInvesting conference in London.
Mr Pittman said that the group was expecting to expand abroad "some time in the next two to four years".
However, Farmland Partners will not be looking for acquisitions to Western Europe, despite the region's strong record on property rights, because of the high price of land, inflated by non-agricultural factors.
"You get things like population density coming into play, or in the UK some inheritance tax planning," with British farmers allowed to pass on their holdings tax free, a perk seen as supporting prices beyond levels justified by agricultural dynamics alone.
"The yield available in Western Europe is just too low," Mr Pittman said.
"It is less than 2% in the UK," with the Farmland Partners cost of capital "too high" to make such investments viable.
The group's business model relies on buying land for renting out, rather than farming the plots itself - allowing it to exploit yields and capital appreciation, but without assuming the risks, such as weather, inherent in agricultural production.
Farmland Partners rates itself as one of the top 20 US farmland owners, by value, and particularly strong in the Midwest, which Mr Pittman termed the "Park Avenue of farmland".
By Mike Verdin