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AACL Grain Co-Production 2008 Project

AACL Grain Co-Production 2008 Project
Cash Rebate 4.10%
Closing Date CLOSED
Minimum Investment $24,000 (ex GST)
Term of Project 3 years
Research   Adviser Edge 4 stars
ATO Product Ruling 2007/94

2008 Grain Co-Production Project

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

The 2008 Grain Co-Production Project (Project) will enable investors to invest in the production of wheat and barley crops on various properties located across the Australian Grain-belt. The Australian Grain-belt includes regions within Western Australia, New South Wales, South Australia, Victoria and Queensland.

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. Investors will plant a crop for each of the 2008, 2009 and 2010 seasons.

Professional farmers will provide the land, equipment, inputs and expertise in order to plant, manage and harvest the investor’s crops. The farmers benefit from the access to additional cash-flow and the sharing of risk with investors. In addition, the farmers will share in any upside returns from the investor’s crops – an extension to the Australian ethos of share farming.

The introduction of Grain Co-Production narrows the gap between Australian agribusiness and other industry sectors by providing a ready instrument that allows investors to participate in mainstream agricultural cropping enterprises outside of purchasing rural property, plant, equipment and expertise.
Advanced Trading Australia – 2008 Expert Price Risk Advisers Report



The wheat and/or barley 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 investor’s production and price risk.

The wheat and barley in the Project Pool will be managed and sold by Macro 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 capital and returns received at the completion of the 2010 season.

The aim of the Project is to achieve consistent and attractive annual returns to investors from the sale of the harvested crops each year.
 
Domestic and International Markets

Wheat
Wheat is grown and traded globally with the “Big 5” (the US, Australia, Canada, Argentina and the 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 16% of internationally traded wheat each year.

The Australian wheat market operates with a highly competitive domestic market and a regulated export market or “single desk”. AWB Ltd has been the monopoly operator of the “single desk” for over 60 years, however it is unlikely that this arrangement will continue from 2008 and beyond. The Australian Government is indicating that a new, open and deregulated market is likely to be in operation by the 2008 harvest. A deregulated wheat market will provide Australian growers with competition and the opportunity to sell their wheat to multiple buyers into the export market.

 
Demand for Australian Wheat and Barley

Wheat and barley are Australia’s most important grain crops with Australian producers growing approximately AUD $4 billion worth of wheat and AUD $2 billion worth of barley each year.

Australian wheat and barley has a reputation as some of the best quality grain in the world with the majority of Australia’s wheat and barley sold and exported to Asian and Middle Eastern buyers. Australia’s proximity to Asia gives growers an advantage to capitalise on the ever expanding markets of Indonesia, China and India.

In regards to wheat, a combination of factors has seen a sharp decrease in world wheat stocks. Currently, world wheat stocks are at their lowest levels in 30 years as demonstrated in the chart below, as indicated by the red line.

The outlook for international grain prices is strong with wheat and barley consumption forecast to remain steady. New demand for the use of grain to produce bio-fuels is adding pressure to international grain prices as the various crops around the world (e.g. corn, soy beans) compete for planting acreage with crops like wheat.
 
Barley

Australian barley has two main uses:
Feed for livestock, such as cattle
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.
 
Experienced Managers

Macro Funds & AACL
Macro is the Responsible Entity for the Project and is a related party to the Project Manager - AACL. Macro is a funds management business with extensive experience in investment management, financial compliance and investor services and reporting. For further information on Macro, please visit their website at www.macrofunds.com.au.

AACL is the developer of Grain Co-Production and will manage the day to day operations of the Project. AACL will source suitable farmers and land for the Project as well as monitor and report on the progress of investor’s crops during the season.

Contract Farmers
Experienced professional farmers are sourced to provide the land, equipment, inputs and expertise to produce the crops in the Project. The Contract Farmers share in the upside returns of the crops with investors.

Expert Advisers
Expert agricultural consultants will provide ongoing crop inspections, reports and advice to AACL in relation to the crops in the Project each season. Macro has also engaged Advance Trading Australia to provide expert price risk management advice in regards to the protection and enhancement of the value of the grain in the Project Pool.
 
2008 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 provides investors with direct access to one of Australia’s largest and most established industries.

Diversified Crops and Locations
The Project will provide investors with a diversification of crops (i.e. wheat and barley) and a diversification of growing regions and farmers.

No Over Supply or Market Distortions
The Australian Grain-belt is restricted to rainfall zones and as such the majority of available land to produce wheat and barley is currently being utilised. The Project will only grow wheat and barley on established properties and is not expected to grow any more grain than is already currently grown.

Non-irrigated Production
The majority of wheat and barley crops in Australia are grown on non-irrigated land. All of the crops in the Project will 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 unique 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 in order to sell wheat and barley giving investors a degree of certainty in regards to sale and payment for their produce.

100% Tax Deductible
The Project has received Product Ruling PR 2007/94 from the Australian Taxation Office. The ruling confirms that all fees incurred by Growers, including the initial investment, will be 100% deductible in the year in which they are incurred.
Investment Summary
Unit of Investment A Co-Production Unit or CPU A CPU is an area expected to produce 40 tonnes of wheat or 45 tonnes of Barley.
Investment per CPU $4,400 incl GST Covers the costs to plant the 2008 season wheat crop.
Minimum Investment 6 CPU’s or $26,400 incl GST Investors can increase their investment by 1 CPU at a time.
Term 3 growing seasons – 2008, 2009, 2010 A wheat or barley crop will be planted each season with the investors commitment ending after the harvest and sale of the 2010 season’s crop.
Ongoing Costs There are various ongoing costs including the planting of the 2009 & 2010 season crops. The ongoing costs, including the 2009 & 2010 planting costs are expected to be funded from the proceeds of the sale of wheat and barley in the Project (see product disclosure statement for the Project for full details relating to ongoing costs).
Finance Available A Preferred Finance offer is available to finance 100% of the investment. 10 months interest-only followed by 31 months P & I at fixed rates.
Taxation 100% Tax Deductible Product Ruling 2007/94 issued in relation to the Project.

Investment Calculator

An investment calculator from Macro’s website is available for download (click here - Note: Winzip or similar extracting software required). The calculator allows investors to estimate a potential return from the Project by inputting some basic assumptions.

Important:

The information contained in this publication is a summary only, is general in nature and does not take into account any particular individual’s financial situation, objectives or needs. Prior to acquiring an interest in the 2008 Grain Co-Production Project (Project), prospective investors should seek independent financial and legal advice and obtain a copy of the product disclosure statement (PDS), read it in its entirety and determine whether an investment in the Project is appropriate for their needs. Applications must be made on an application form attached to the current PDS for the Project. The Australian Tax Office (ATO) has provided a product ruling for the Project (Product Ruling). The Product Ruling is not expressly or impliedly a guarantee or endorsement of the commercial viability or investment soundness of the Project nor of the reasonableness or commerciality of fees charged. The Product Ruling is only binding on the ATO if the Project is implemented in the specific manner provided in the Product Ruling.


Simply download an Investment Brochure/PDS above. It’s that easy!
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