Farm Tender

The long-awaited divestment process of Consolidated Pastoral Company (CPC) has begun

The Australian agribusiness announced the sale of Nockatunga Station, a bullock fattening operation located in southwest Queensland, to the Harris family’s Cleveland Agriculture.

Spanning more than 850,000 hectares (2.1 million acres), Nockatunga was acquired by CPC in 1990 and includes 5,000 head of cattle and a station plant, and is reported to have sold for as much as $50 million.

Held by UK private equity firm, Terra Firma, rumors about the sale of the CPC portfolio have circulated since November of 2014. Prior to the sale of Nockatunga, CPC owned and operated a portfolio of 16 cattle stations with a carrying capacity of 400,000 head of cattle across 5.5m hectares of land in Australia. The company also holds an 80 percent interest in Juang Jaya Abdi Alam (JJAA), which owns and operates two feedlots in Indonesia.

The sale of Nockatunga comes at an opportune time for both Terra Firma and Cleveland Agriculture. After a banner 2016-2017, which saw agriculture as the largest contributor to Australian GDP growth and record levels of farm production, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasted a return towards mean for 2018. Furthermore, the longer term outlook for the next five years calls for a steady rise in demand in markets targeted by Australian exporters, driven by income and population growth. CPC – an exporting powerhouse with its direct sales channels primarily involved in the sale of cattle and beef to Asian consumer markets, domestic feedlots, or exporting processors, and exporting live cattle – is well-positioned to capitalize upon these trends.

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“While there have been some challenging conditions in some areas of Australia, CPC’s geographically diverse portfolio positions the business well in the current market and season,” said Troy Setter, CEO of CPC. “The business continues to perform well, benefitting from investments in properties and genetics, as well as our Indonesian supply chain and strong demand dynamics for beef in Asia and around the globe.”

Also Diversifying
Despite being for sale, Consolidated Pastoral Company (CPC), one of the largest cattle producers in Australia, is diversifying its operations through expansion into crop production in the northern region of the country.

There exist a number of drivers behind the decision to expand into cropping, according to Setter, including the establishment of additional channels of income.

“…whether its sorghum hay or sorghum grain, or whether the next crop following the sorghum could be something like mangoes or melons. We’re still working through that, but we’re certainly committed to developing and looking at all opportunities in northern Australia,” Setter told ABC.

Additionally, the addition of cropping operations and higher self-sufficiency in cattle feed could make CPC stations more attractive on the market.

In a Global AgInvesting Europe 2017 presentation on the key risks and effects on farmland returns, David Sackett, managing director at Growth Farms Australia, highlighted the need for investors in Australian pastoral assets to focus on properties that bring the potential for optionality if the markets change.

Setter told ABC that the company is also open to possibly growing cotton or corn on some of its other stations.

“Some of those opportunities were developed in the 1990s, but not executed on, and hopefully over the next couple of years we can start to [take up] these opportunities.”

For Cleveland and the Harris family, which controls both irrigated and dryland cattle and cropping operations across four Australian states, including the 450,000-hectare Benmara Station in the Northern Territory, the 5,000 square kilometer Rockhampton Downs, and the Gogo Station in Western Australia, the addition of Nockatunga will add significantly to their portfolio – and it is being speculated that the station will be used to grass-finish young cattle.

“The successful divestment of Nockatunga Station to Cleveland Agriculture reflects the quality of the station and the potential for further development,” said Setter. “Malcolm and his team share our vision for investment in land development and precision pastoral management.”