Warakirri: Grow by name, grow by nature

Warakirri is an Australian Aboriginal word meaning “to grow”. Just three years after Warakirri Asset Management began offering agricultural services in the mid 1990s, the Melbourne-based boutique firm received a mandate from an Australian superannuation fund seeking exposure to agricultural land.

That fund, Rest, was an early mover into a sector that is still largely outside the investment mindset of most institutional peers.

Together, Rest and its manager established Warakirri Cropping. The business has grown its portfolio to 11 aggregations totalling more than 150,000 hectares and is today one of Australia’s largest grain growers. It owns and operates a diversified portfolio of large-scale and highly productive cropping aggregations across the northern, southern and western grain production zones of Australia. 

Along with local superannuation funds, Warakirri has also managed agricultural land for global investors. It managed an Australian row-cropping business for Public Sector Pension Investment Board from 2016 to 2022, when the Canadian investor internalised management of its two majority-owned Australian cropping businesses, BFB and Daybreak Cropping.

After exclusively managing large cropping portfolios for these institutional investors, in 2023 the firm reached a point in its business where it began offering its cropping management capability to new institutional investors for the first time in many years.  

This led Warakirri to form a new venture, Solterra, to manage a portfolio of farms on behalf of Alkira Farms, a wholly-owned subsidiary of US-based Farmland Reserves. It is understood that the US investor committed some A$300m (€180.6m) to acquire a seed asset of around 26,000 hectares in a mix of irrigation and dryland cropping in Queensland.

Farmland Reserves is the US$265bn agriculture investment arm of the Church of Jesus Christ of Latter-day Saints, which owns about 370,000 hectares of farmland across Nebraska, Oklahoma and Florida.

Collectively, Warakirri today manages assets covering 80 individual aggregations spanning 535,000 acres, with 110,000 megalitres of water entitlements valued at A$3.8bn. It is the second-largest agricultural manager in Australia after Macquarie Asset Management. 

Focus on sustainability

One guiding principle that has stayed true through the years of managing assets on behalf of Warakirri’s investors is that it should generate competitive returns with an ever-increasing emphasis on sustainability. 

“Agriculture plays a critical role in managing the world’s resources,” says Adrian Goonan, investment director for agriculture. “So naturally, sustainable farming systems are important. As natural capital managers we have a role to play in establishing and running farming systems sustainably, so we can leave the planet in a better place for future generations.”

Goonan says that resilient, stable returns and taking measures to protect the environment are not mutually exclusive.

“Our experience is that successful agricultural investment has a strong long-term focus on sustainable farming systems and significant investment in systems and practices to enhance soil fertility, reduce water runoff, increase water capture and maximise soil cover to achieve cost-effective productivity and maximise water use efficiency,” he says.

“Twenty years ago, our weighted-average portfolio required 88ml of rainfall to produce one tonne of wheat. With the evolution of technology and farming practices, today we can produce the same tonne of wheat with just 66ml. We have made significant improvements in productivity over those 20 years, achieving a 23% gain over the period.”

Four businesses

This approach is evident in the management of four distinct businesses – Solterra, Aurora Dairies, Warakirri Cropping and two commingled funds – Warakirri Farmland Fund and Warakirri Diversified Agriculture Fund.

“We have 700 full-time employees with a large number based on farms and employed within the investment strategies,” Goonan says, adding that teams of specialists work on improving water use efficiency, productivity, soil fertility and the preservation of soil organic carbon.

“More recently, we are seeing great advancements in technology adoption on our farms. The thinking has shifted from fallowing and resting land to creating more productive and healthier soils, through to planting more diverse crop rotations to improve soil fertility.”

There is also increased use of natural fertilisers, such as legumes, to reduce the reliance on synthetic fertilisers. But Goonan says fertilisers still remain an important part of agricultural systems. Certain areas will rely on them more than others. “Then, the strategy becomes how to optimise the efficiency of that synthetic fertiliser,” he says.

“We do a lot of work around climate variability and understanding the risks of climate change and the different climate change scenarios on different production systems and regions. These are overlaid with our investment strategies.”

Goonan adds: “Our experience and our clients’ experience is that very well-scaled, well-considered geographically diverse portfolios can produce very strong and stable returns, and we have found those returns to be comparable to Australian and global equities – with half the level of volatility. We find that agriculture returns have zero or negative correlation to all traditional asset classes.

“We are seeing an increased appetite from the investment community to incorporate environmental services, like carbon and biodiversity values within strategies. Investors are looking at agriculture through a broader lens – positive impacts on people, communities and the environment. This reflects some maturity and a shift from a hard net-zero mandate and the desire for quick wins in carbon offset.”

But overall, says Goonan, there appears to be a more balanced approach and a return to the core attributes of agricultural investments and return.