Agriculture & Food
Stafford’s Agriculture & Food business line aims to make the global agriculture and food sector more investible and improve productivity in a sustainable way by combining capital with best-in-class industry operators. The team manages investments across two funds and one mandate.
Stafford Agriculture & Food invests in farmland across North America, Australasia and Latin America, countries with a long-term structural comparative advantage in agricultural production. We have also invested in aquaculture through a co-investment into a specialized aquaculture vessel company, which services offshore fish farmers and feed carriers in Europe and the Americas.
Stafford Agriculture & Food in a nutshell*
2017
Launch year
USD 80m
Assets under management
46
Underlying assets
20,000+
Hectares of land owned
*Data as of December 31, 2021.
Sustainability considerations in our investments
Agriculture & Food is a sector of increasing importance from an environmental, social and governance (ESG) perspective. Food production is clearly considered an essential industry but contributes a significant percentage of global greenhouse gas emissions1. Farming and downstream (value chain) activities can create negative impacts on biodiversity, water quality/availability and the livelihoods of native peoples (so-called ‘land grabbing’) if pursued without effective safeguards.
Stafford’s farmland investment strategy is to acquire existing farm assets and to lease them to top-tier local tenant operators, our farmland managers, who are best placed to operate the assets. Farming is an ageing business; to take the USA as an example, the average farmer at the latest census (2017) was 57.5 years old, up from 56.3 years in 2012. Most of the assets acquired by Stafford have been sold by owner-operators (predominantly family businesses) who are in the process of winding down their operations due to retirement and have neither the capital nor the incentive to maintain and operate their assets in an optimal productive condition. As well as putting these assets into the hands of growing farming businesses, typically run by younger farmers looking for scale, Stafford invests in asset improvements such as new fencing, improvements in water storage, new livestock yards and soil amelioration (nutrient inputs and lime to reduce acidity) to bring our assets into their most productive state and to improve ESG outcomes.
Similar to the farming industry, the aquaculture value chain – diverse, fragmented and dominated by family businesses – is consolidating through the injection of new capital and more professional management and operational systems. Vessel services are a small part of a fish farmer’s cost of production; however, they are essential to the industry and increasingly relevant from an ESG perspective. For example: modern service vessels are used to treat sea lice infestations, washing fish clean of parasites, reducing or eliminating the need for chemical treatments; modern harvest vessels eliminate the need to keep mature fish for weeks in pens next to onshore harvest sites, where disease, water contamination and other externalities can result. One of our portfolio companies leads the way in improving the sustainability of the global offshore farming industry; it owns and operates ten live fish carriers (with two more under construction) capable of treating sea lice infestations and a suite of four modern harvest vessels with on-board harvesting capabilities.
[1] 8.5% of all greenhouse gas emissions directly, a further 14.5% coming from land use change, mainly deforestation in the developing world to make room for agriculture, according to IPCC's Special Report on Climate Change and Land, 2019.
Monitoring farmland managers’ ESG performance
The local asset managers and operators who manage Stafford’s assets on a day-to-day basis have a high regard for sustainability and responsible investing. Stafford uses the PRI reporting and assessment tool to monitor and assess how they integrate ESG considerations into their investment process. This survey is typically conducted every year, with 2022 being an exception, given that the PRI’s 2021 reporting cycle was extended over two years.
The farmland fund managers’ responses to the 2021 survey were assessed and scored, and the scores then translated into star ratings.1 The distribution of ratings for farmland managers who responded to our 2021 ESG survey is shown in the figure below.2 A five-star rating reflects the current best practices in the investment management industry while one star suggests the lack of ESG policies and practises and early stage ESG integration.
Stafford selects farmland managers based on their ability, expertise and capabilities to execute and deliver on the ESG criteria articulated in Stafford’s ESG strategy and policy. As illustrated by their most recent (star) ratings, the managers have solid policies and processes but still have room to improve to reach the best ESG practices. It is worth noting that the ratings may not adequately reflect the specific farmland ESG thresholds and objectives that Stafford has included in its farmland ESG strategy, also because the PRI questionnaire does not include farmland-specific indicators. Nevertheless, we are actively engaging with our local managers to constantly improve ESG outcomes and facilitate their work in this respect.
Distribution of farmland fund managers' star ratings for responsible investment and stewardship policy
Source: fund managers, PRI, Stafford Capital Partners; scores as of 03/08/2022, based on 31 December 2020 data.
[1] The star ratings are assigned based on the percentage scores across managers of all sectors as follows:
Percentage thresholds Number of stars
0 ≤ 25% 1
> 25 ≤ 40% 2
> 40 ≤ 65% 3
> 65 ≤ 90% 4
> 90 ≤ 100% 5
[2] Stafford used the PRI’s 2021 survey and assessment methodology. Managers are being assessed on multiple indicators that are related to their responsible investment policy, strategy, governance, stewardship, climate change and transparency. The resulting ISP score ranges between 0% to 100%. Details on the PRI’s 2021 assessment methodology can be found here: https://dwtyzx6upklss.cloudfront.net/Uploads/v/g/y/2021_assessmentmethodology_jan_2021_403875.pdf
ESG initiatives across Stafford’s Eastern Australia farmland portfolio
We are pleased to be able to report on various ESG initiatives underway or planned for 2022 on our assets in Eastern Australia, which exemplify what is happening across our wider agriculture portfolio. We provide details on selected initiatives below.
Lawling Vale (New South Wales) :
Completion of dams for water storage, improving the availability of stock water as well as reducing erosion through water run-off and improved grazing management.
Completion of stockyards, leading to more efficient livestock throughput and safer stock handling for employees.
Fencing works completed to enable improved pasture management, avoiding over-grazing and soil degradation.
Extensive weed control (St John’s Wort, Bathurst Burr and thistles) to limit invasive species.
Chetwynd South (Victoria):
Tenants have applied for a grant to fence off a tree lane in Stack West and to plant Stringybark trees. This will provide valuable food for the endangered Red-Tailed Black Cockatoo, which uses the water troughs to drink daily, before nesting in the Redgum hollows.
Grazing management of fenced off creeks and gullies to maintain ground cover but also to minimise the potential risk of long dry grasses becoming a bushfire hazard.
Every year tenants donate to the local Chetwynd rural fire brigade, help at fundraising barbeques and participate in the brigade itself at fires. Their business also donated to the local show society for their Quickshear competition, a community event promoting the shearing profession.
Staff will undergo training in low stress stock handling training in 2022.
Nugent Park (New South Wales):
Application of lime and gypsum to improve soil structure (ongoing since March 2020).
Wildlife exclusion fencing along the farm’s boundary with the State Forest, expected to reduce pasture damage and soil erosion arising from wildlife grazing pressure.
North Clifton (Tasmania):
Application of lime to improve soil pH and to improve the availability of soil nutrients.
Replacement of the forcing yard, race and loading ramp in the cattle yards to improve operator safety and animal handling.
Completion of an improved stock water system to enable effective sub-division of paddocks and improve pasture management.
Ashleigh (New South Wales):
Contour and waterway management – extensive contouring work in fields to control flows of surface water and direct them into waterways.
Grazing management – focusing on maintaining ground cover to increase the water use efficiency of pastures.
Observing an environmentally sensitive area called Warialda creek, which is fenced off in areas and grazing/farming around these areas is undertaken with care.