Williams, who works for the MyFarm syndicate organiser, said pipfruit offers the best mix of investability and opportunity followed by tree planting with carbon credits.
He showed MyFarm seminars for investors and analysts last week a heat map analytical approach across the whole primary sector on factors such as asset values, market revenue, land prices, establishment costs, stage of growth and risk-adjusted returns.
The map helped highlight real value propositions and new industry momentum in which investors are climbing aboard a train that is already moving.
The size of the market and the liquidity are also important factors to consider along with an industry’s expansion potential in terms of access to intellectual property, capital and labour.
Some of the crops have seen returns on capital of 10-12% a year over the past five years and might be topping out in terms of the asset values, Williams said.
He singled out gold kiwifruit orchards in Bay of Plenty with $1 million-plus a canopy hectare prices.
While not expecting a continuation of the recent returns Williams thinks there are opportunities in many industries that will generate 5-6% returns on investment over the next five years.
The heat map includes dairying at over $100b in capitalisation and industry value, meat and wool at $80b, forestry at $14b, and kiwifruit at $8b.
The primary sector, excluding fishing, has over $200b of assets.
Going deeper into kiwifruit, he said prospects are good for gold returns at $10 a tray when factoring in huge emerging markets in China and North America.
The Zespri model has strong factors such as branding, reinvestment, category growth and new product in the future.
On the negative side are high orchard values and the biosecurity risks associated with BoP population density and port location.
Apples are ranked number one for investability because of several factors, headed by NZ’s world-class productivity.
Average orchard yield here is 60t a hectare but some new, high-density growing regimes are achieving 100-130t a hectare.
Markets for NZ apples are widespread and the industry is not as reliant on China as many others.
New varieties are in the pipeline and club varieties offer a means of access for new growers though there have been some failures with that approach.
Some older orchards could be regrafted to higher-performing varieties but that promises only 12 to 15 years life before the need for replanting.
Carbon forestry investment starts with a big advantage of cashflow from carbon credits in the early years and in the case of manuka plantings the credits are on top of crop returns.
Government decisions to come this year will probably result in a higher carbon price in the medium term.
At $25/t that would add 2.5% to the standard 7% forestry return on investment and at $50 total returns would climb to 13% a year.
Williams said a combination of a floor price for carbon credits and an averaging approach to multi-rotation forests would avoid the end-of-cycle return and liquidity risks for investors posed by the requirement to pay back carbon units.
