Mac Group the new cattle king

Having launched an agricultural version of its classic investment funds in 2007, Macquarie is looking to add several more specialist vehicles targeting the farming sector following the rapid-fire success it has experienced.

With landowners such as the Packer family and sharemarket companies like Great Southern Group either selling down or being forced out of the industry over the past 12 months, the Macquarie Pastoral Fund has taken advantage of lower land prices to amass a large portfolio.

The fund - which operates through its wholly owned management arm, Paraway Pastoral Company - owns 16 properties, of which six were acquired last year. Those deals took its land holdings to 2.9 million hectares and its combined total of cattle and sheep to more than 300,000 animals.

Macquarie Pastoral began life by snapping up land in the Riverina region of NSW, including three well-known sheep properties, Pooginook, The Bulls Run and East Borambil.

In what has become a hallmark of its operations, PPC then acquired neighbouring farms under a process of aggregation to form much larger and presumably profitable properties.

The same model was used in late 2008 when the fund expanded in regional northern NSW with the aim of becoming a cattle breeding and fattening operator using the Hereford and Angus breeds.

But its transformation into a big league player - a select group which now includes the British private equity operator Terra Firma following its purchase of James Packer's Consolidated Pastoral Holdings for $425 million - came last year with its move into Northern Australia.

Seven cattle stations and hay producing farms were bought across Queensland and the Northern Territory to support the breeding of Brahman and crossbred cattle, which are sold to the domestic and international markets.

Those deals propelled Macquarie Pastoral into the top 10 landowners with the Queensland acquisitions notable for their sale by the troubled Australian Agricultural Company.

Macquarie Pastoral's investment policy has been driven by estimates that Asia will soon import more beef by volume than Australia's total production. Australia is one of the world's biggest exporters thanks primarily to its large stocks and high quality of the meat that is produced.

"Rising urbanisation and increasing disposable income in Asia is leading a greater demand for meat," said Peter Maher, Macquarie's head of banking and financial services, at the group's annual briefing last week.

As a consequence, the fund has attracted more than $500 million from investors who like the fact that their money is directly linked to "hard" assets such as land and property and the regular income generated from very visible livestock.

After increasing its net asset value per unit last year, Macquarie Pastoral is due to update investors in April on its performance for the 12 months to March 31, with all eyes not just on land prices but also those being obtained for its beef and lamb.