New Forests: Ploughing a new furrow in agriculture

New Forests, founded in 2005, is the third-largest forestry investment manager, but in recent years has been expanding into agriculture and today has more than €900m in assets under management in the sector.

The firm has managed agriculture for clients like Alberta Investment Management Corporation (AIMCo) for several years, but in 2022 it relaunched the business as New Agriculture.

Arguably, agriculture is where most substantial change can be achieved, because it remains the dominant land use. In Australia, the total area of land under primary production is nearly 446m hectares – 58% of the Australian land mass. Excluding grazing of natural vegetation, this area reduces to approximately 101m hectares (13%). By comparison, the plantation forestry sector (excluding native vegetation) represents approximately 1.7m hectares, just 0.2%.

These figures drive the philosophy behind a decision by the successful Sydney-based New Forests to establish New Agriculture, a new plank of its fund management platform, initially focused on Australia and New Zealand.

Today, New Agriculture manages agricultural land equivalent to the size of a small European country. Along with investment partner AIMCo, New Agriculture acquired what was known as the Kimberley Cattle Portfolio from a Chinese tycoon in late 2023 for A$300m (€181m). The transaction ceded control of 2.9m hectares of mainly cattle grazing land in northern Western Australia to New Agriculture. 

“To be able to own and manage such a large parcel of landscape does give us an ability to play an outsized role in improving the land with regenerative agriculture,” says Bruce King, head of New Agriculture.

Australia offers a fertile environment for institutional investors like New Agriculture because it is a liquid market. Around A$10bn worth of agriculture assets are transacted every year in Australia, according to King.

Family-owned land

“More than 90% of agricultural land is held in family businesses, which are often financed by debt,” he says. “We see an opportunity to bring long-term patient capital to bear and make the kind of investments that allow us to improve soil health and the entirety of the production system.

“We have the ability to focus on a regenerative approach from sequestration of carbon in the soil through to improving access to biodiversity corridors; doing so, we can keep natural native fauna and flora integrated with the landscape.”

The Kimberley asset was New Agriculture’s second joint investment with AIMCo in as many years. In 2022, the partners bought Lawson Grains, a leading grain producer in Australia, from Macquarie Asset Management.

Together with the Kimberley assets, New Agriculture now manages more than 3m hectares. The acreage under management is expected to grow further following the launch of a new landscape strategy for which New Agriculture aims to raise A$650m to A$800m from investors keen to gain exposure to land-based assets. The platform has already identified a pipeline of assets.

“The new vehicle will focus on four main production sleeves – irrigated and rain-fed row cropping; permanent cropping including horticulture, livestock and forestry,” says King. “It wouldn’t be a landscape strategy without some form of forestry.” 

The strategy will pave the way for New Agriculture to diversify into permanent cropping, which usually means vineyards, nut and fruit trees.

New Forests itself has been involved with agriculture for 15 years. It cultivates significant agricultural land, accounting for about 10,000 hectares, as part of existing forests and landscape management strategies.

Agriculture took on greater significance with the takeover of Lawson Grains, a sprawling operation of 11 aggregations across three states. It came with around 90,000 arable hectares, then devoted to growing grains. “We have continued to add assets which has expanded to 120,000 arable hectares. But not all the land in the portfolio is arable,” says King. “Lawson Grains is a fantastic fit to our portfolio.”

King joined New Forests from a federal government agency, the Regional Investment Corporation, to lead the agricultural business in 2022 and to prepare for the launch of the new business.

Carbon emissions and soil health

He says the company’s first focus when it took over Lawson Grains was to set up a baseline of carbon emissions and soil health. “We implemented a soil carbon project and registered it as a soil carbon project,” he says. “By registering it, you are able to generate Australian carbon units. You can either sell them into the market or use them as an offset for existing emissions on our property. This gives us the potential for an additional revenue stream.

“We are starting to build up the amount of organic soil carbon that is in the soil by changing our management practices. Over the next 25 years, our forecast is that we can lift the percentage of ground carbon from 1% to 1.3% – a 30% increase – across more than 10,000 hectares.”

New Agriculture has reduced tillage on the farm and adopted ‘green-on-green spraying’, a new technology that visually distinguishes weeds from crops. Stubble from harvesting is left behind and cover crops are cultivated to die back and return micronutrients to the soil. It also helps to create a store of fungal activities in the soil.

“Traditional farming has been about dividing agriculture into monoculture or into very specific enterprises,” says King. “The real difference in our approach is that we understand that not every hectare of land can be managed in the same way. We look at how we can best optimise the overall landscape through managing biodiversity, carbon, cropping and introducing permanent crops.

“With Lawson Grains, we have expanded the mandate to include other forms of farming on the land. Previously, the sole focus was on cropping every hectare of land to drive returns. We have brought livestock into some areas and are looking at potentially using less productive land for afforestation.”

Of the vast Kimberley asset, King says the first critical task has been to improve infrastructure. “The soil under the pastureland is delicate,” he says. “Australia’s northwestern region gets very big wet seasons in summer and then extended dry periods over the winter. We have invested in building fencing and watering systems. We fence off areas during the wet season and move the cattle to other areas. This will allow the soil to rejuvenate and the pasture to strengthen. But it is a multi-year process to improve the overall health of the soil.”

Healthy soil is more resilient to extreme weather. King says it takes longer for healthy soil to be affected by drought, because it retains more moisture and when the rain does come, healthy soil has better infiltration and absorbs water more quickly.

‘Cool burning’, a patchwork burning technique borrowed from Australia’s indigenous culture, has been integrated into the land management as part of the bushfire mitigation strategy. When fuel accumulates on the ground and a major bushfire breaks out, like the one in New South Wales in 2019, some 80% of forest biodiversity and native animals can be destroyed.

New Agriculture has continued a project started by the previous owner to build swales – shallow channels that divert stormwater – on overgrazed and eroded areas of the land to slow water runoffs, trap seeds and enable weeds to grow back over time and to regenerate native pastures.

“We have trial sites and continue to expand the programme as we identify more degraded areas,” says King. “We are interested in talking to the Western Australian government for support of the project. We hope to demonstrate to other beef producers in the region how this method of land management can improve and return degraded pasture to production.”

New Agriculture has undertaken other works to improve production and cut back emissions, including the use of the latest genetics which play a key role in improving the fertility of the herd, faster production and other characteristics to improve the overall output.

In embracing a fresh scientific approach to farming, New Agriculture says there is a place for traditional agriculture which relies on artificial stimulants like fertilisers or pesticides, but the preference is for natural systems. “We work to increase yields using natural systems and processes,” says King. “This is how we regenerate and enhance land – a very scarce resource.”