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

DBF NAV $2.69
Change   Fair Market NAV Per Share as at 30 June 2022

Duxton Farms Limited ("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, and the strategic development of properties.

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

SQM Research rates Duxton Farms 4 stars high investment grade

Duxton 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 Farms and teamed with potential up-lift in local land values, this should result in stronger returns for investors over time.

Our Properties

Duxton Farms owns and operates a major geographic aggregation in NSW. The aggregation is located between Forbes and West Wyalong.

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

This Month on the Farm



WINTER CROP
Due to the continued wet weather and flooding, the harvestable area for the Company’s Forbes aggregation will be reduced significantly in comparison to last season . Whilst the full impact is not yet known, at this stage the Company expects that total winter harvest volumes will be reduced by approximately 60-80%. Duxton Farms expects that it will take several weeks of warmer and drier weather before it will be able to begin harvesting the surviving winter crops. Upon the completion of harvest, preparations for next season will commence.

SUMMER CROP
Duxton Farms was unable to plant any cotton this season due to the prevailing wet weather conditions, which prevented the operation of any heavy machinery, or the application of chemical and fertiliser. All of the cropping area that was planned for cotton has suffered from major flooding. Damage to irrigation infrastructure, whilst expected to be limited, will be assessed when the floodwater recedes. As floodwater recedes, the Company plans to plant some areas of forage sorghum, to increase hay supplies and utilise higher soil moisture levels.

LOCAL WEATHER
Duxton Farms’ properties continue to experience challenging conditions, with ongoing significant flooding and above average rainfall affecting much of eastern Australia. As previously disclosed, major flooding has occurred in the Lachlan Valley, severely disrupting operations. The Company’s main focus has been on ensuring the safety of its staff and livestock, and on mitigating the extent of damage to the Company’s property. Central West New South Wales (Forbes Airport AWS) recorded 169.4mm of rainfall for November, compared to the long-term monthly average of 48.9mm. On 13 November the region was impacted by particularly intense thunderstorms, with the Forbes Airport AWS weather station recording 110mm of rainfall in a single six-hour period. Total rainfall of 118mm for the 24-hour period ending 9.00am on the 14 November was an all-time record for any 24-hour period across any month since observations at Forbes Airport AWS began in 1875. Total rainfall during 2022 to date has been 92% higher than the 2007-2021 average and 4% lower than at the same time last year. Mean maximum temperatures averaged 23.5°C for the month, substantially cooler than the long-term average for November of 29.0°C.



LIVESTOCK
In light of the floods, livestock are being moved between the Forbes properties to non flooded areas to ensure their safety and to take advantage of the favourable feed and field conditions As at the end of November, livestock remain safe and accounted for across the Company’s New South Wales properties Sale of livestock has been limited due to flooding preventing the movement of livestock to sale yards The Company has made fodder during this month with wetter conditions preventing the production of hay The Company continues to maintain adequate feed reserves to maintain its livestock and breeding program.