High Aussie agricultural land prices makes Brazil attractive alternative

Rob Newell talks quickly for a farmer, sprouting facts and betraying his excitement, reports The Australian Financial Review (5 July 2006 p69). The cotton grower from Goondiwindi has the usual laundry list of complaints afflicting rural Australia – drought, poor prices and a lack of skilled labour – but unlike most of his colleagues on the land, he’s done something about it.

Why tough it out in Aust? The 56-year-old has bought land in Brazil. "I should have done it 10 years ago," he says. "Why would I expand in Australia? The land is expensive and it hardly ever rains."

Multi-national flavour to venture: A former boss of the Australian Agricultural Company (AACo), John Griffith, is looking to establish a $100 million cattle business with the backing of local and international investors. Newell’s 23-year-old son, James, fresh out of the Marcus Oldham College in Geelong, is in South America setting up the farm and learning Portuguese.

Agricultural brain drain: "He’s young and wants to have a go and I can’t wait to get back over there," Newell says. Newell has a 10-year business plan that involves significant expansion in Brazil. He can see the day when he would sell his 1800-hectare cotton farm in Queensland (worth about $31 million) and move there for good.

Aust more risky proposition: A fellow cotton grower from Warren in western NSW, Tony McAlary, is not as excitable as Newell, but equally determined. He reckons there are more risks associated with buying land in Australia than Brazil. "The price of land in Australia is unjustifiable and it’s a huge gamble as it does not rain much anymore," he says.

Short and long term goals: "We think within five to ten years parts of Brazil will have wiped out foot and month and will have access to those markets [in the US, Japan and Korea]," he says. In the meantime, improving the genetic qualities of the local Nelore cattle, which have low fertility rates, will be the focus.

Deal close to done: Griffith’s consortium of local and international investors is looking to spend $ 100 million buying land and cattle. "We have identified the land and hope to have the deal finalised within two months," he says.

High herd numbers, low land cost: But the opportunity is not only cattle even though Griffith is aiming for a herd of 500,000, which is huge by Australian standards. "We are buying our land in Brazil for about one-sixth of the prices in Australia."

The Australian Financial Review, 5/7/2006, p. 69

Source: Erisk Net  

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