AACL Grain Co-Production 2010 Project

Grain Co-Production is an innovative investment opportunity that brings together professional grain farmers and investors.

AACL, on behalf of investors, manages the largest grain production operation in Australia. The 2010 Grain Co-Production Project (Project) will enable investors to invest in the production of wheat, barley and canola crops on various properties located across the Australian Grain-belt. The Australian Grain-belt includes regions within Western Australia (WA), New South Wales (NSW), South Australia (SA), Victoria (VIC) and Queensland (QLD) (see map below).

The Project will operate for three seasons with each season commencing from planting in approximately April/May of each year and finishing at harvest, typically in November/December of the same year. A crop will be planted on behalf of investors for each of the 2010, 2011 and 2012 seasons.

Professional farmers will provide the land, equipment, inputs and expertise in order to plant, manage and harvest the investors’ crops.

The farmers benefit from access to additional cash-flow and the sharing of risk with investors. In addition, the farmers will share in any upside returns from the investors’ crops – an extension to the Australian ethos of share farming.

The grain produced from each property will be pooled from across various production zones to form the Project Pool. The Project Pool is a key component to managing the investors’ production and price risk.

The wheat, barley and canola in the Project Pool will be managed and sold to various established buyers for on-sale to domestic and international markets.

Investors are expected to receive annual returns from the sale of the grain in the Project commencing in Year 1, with the majority of their investment return expected to be received at the completion of the 2012 season.

The aim of the Project is to achieve attractive returns for investors from the sale of the harvested crops each year.

Grain Co-Production Project Features

ACCESS TO A MAJOR AUSTRALIAN INDUSTRY
Investors have largely been unable to directly invest in the Australian grain industry due to the capital requirements and a lack of opportunity. The Project will provide investors with direct access to one of Australia’s most established industries.

DIVERSIFIED CROPS AND LOCATIONS
Each season the Project will provide investors with a diversification of crops (i.e. wheat, barley and canola) and a diversification of growing regions and farmers.

NO INCREASE IN SUPPLY OR MARKET DISTORTIONS
The Australian Grain-belt is restricted to rainfall zones and as such the majority of available land to produce grain is currently being utilised. The Project will only grow wheat, barley and canola on established properties and is not expected to grow any more grain than is already currently grown.

NON-IRRIGATED PRODUCTION
The majority of wheat, barley and canola crops in Australia are grown on non-irrigated land. It is expected that nearly all of the crops in the Project will also be grown on non-irrigated land and as such will not have any reliance on water allocations or access to water entitlements.

SHORT TERM INVESTMENT TIMEFRAME
The Project is different to almost every other agribusiness investment opportunity in that it aims to provide investors with an annual return commencing Year 1, whilst their investment period is for three seasons only.

DOMESTIC AND EXPORT MARKETS
Mature and established domestic and international markets exist within the grain industry in order to sell wheat, barley and canola giving investors a degree of certainty in regards to sale and payment for their produce.

TAX DEDUCTIBILITY
The Project has received Product Ruling PR 2010/2 from the Australian Taxation Office. The ruling confirms that all fees incurred by Growers, including the initial investment investment, will be 100% deductible in the year in which they are incurred.

Domestic and International Markets

WHEAT
Wheat is grown and traded globally with the “Big 5” (US, Australia, Canada, Argentina and EU), normally accounting for approximately 80% of internationally traded wheat each year. Australia is a key player in the international wheat market, accounting for approximately 13% to 15% of internationally traded wheat each year.

The Australian wheat market operates with a highly competitive and deregulated domestic and export market with producers having access to well established systems in which to sell their wheat.



BARLEY
Australian barley has two main uses:

• feed for livestock, such as cattle; and
• malting for brewing.

The Australian barley market is effectively deregulated with producers able to sell barley to any buyer on the domestic market or to any licensed exporter for the international market.

The majority of Australia’s barley crop is exported each year with Australia being one of the largest exporters of barley in the world. Australian barley accounts for approximately 32% of internationally traded malt barley and 20% of internationally traded feed barley annually.



CANOLA
Canola is the main oilseed crop produced in Australia with an average production of 1.3 to 1.5 million tonnes per annum and is grown across WA, VIC, NSW and SA. Oilseeds are a significant component of the food industry and their products are major ingredients in global food and feed value chains where they are part of a very large global business.

In Australia, canola is grown to produce seed, oil and meal. Canola oil is the main product of the seed and the by-product of this oil extraction is canola meal which is supplied to the stock feed industry.

Canola is a crop with strong demand and established markets both domestically and internationally. It is Australia’s largest oilseed export with an average of 1 million tonnes exported each year to Japan, China, Pakistan and Bangladesh. By international standards Australia is a relatively small producer of oilseeds however, because of its generally high quality it has developed important sales markets.



Demand for Australian Grain
Wheat, barley and canola are Australia’s most significant grain and oilseed crops with Australian producers growing approximately AUD $5 billion worth of wheat, AUD $2 billion worth of barley and AUD $1 billion of canola each year.

Australia has a reputation of producing high quality grain and oilseeds with a high proportion of Australia’s wheat, barley and canola sold and exported to Asian and Middle Eastern buyers. Australia’s proximity to Asia gives Australian growers an advantage to capitalise on established markets such as Japan and South Korea as well as the ever expanding markets of Indonesia, China and India.

International consumption of grain and oilseeds is forecast to remain steady which is expected to support current grain values in the medium term.



Experienced professional farmers are sourced to provide the land, equipment, inputs and expertise to produce the crops in the Project.