Dairy price increases benefit AGRI Fund

-Press Release

Wednesday 25th July 2007

The AGRI Private Capital Fund (AGRI Fund) says New Zealand is beginning to see the impact of a world "food shock" that will steeply increase the value of its dairy products and agricultural commodities.

AGRI Fund spokesperson Andrew Watters says a structural shift in the supply and demand for food is a major factor behind today's announcement that Fonterra is increasing its dairy payout from a forecast $4.35 per kilogram of milksolids (kg/M) to $4.50 kg/M, including premiums.

"We believe this is a medium to long term shift. It reflects increasing global population growth; the Westernisation of diets to animal protein based foods (particularly in Asia) and; a trend towards planting arable land for bio-fuel instead of food," Watters says.

"When we started working on the launch of the AGRI Fund we thought that the sector had excellent prospects. But dairy prices have now exploded even quicker than previously anticipated, making the rationale for investing in the Fund even more compelling."

"We expect food prices to continue to appreciate in the medium to long term, creating opportunities for all New Zealand farmers and the agribusiness sector that services them. The result will be a stronger economy based on primary products."

Watters says the strength in the economy is likely to be even stronger than in the 1950's when agriculture truly provided the engine room for growth in the economy. "Never has the direct relationship between the health of the primary sector and the health of the New Zealand economy been more evident."

Watters says the opportunity to invest in the agriculture sector is now. "Agriculture is expected to continue to grow strongly and deliver long-term benefits to investors in this economy."

The AGRI Fund, which is currently seeking to raise more than $60 million from the public, is targeting an internal rate of return of 15% per annum on equity invested in assets (before tax and Manager's incentive returns, but after annual management fees) over the life of that investment. It will ordinarily invest 50% in high potential pastoral farms and 50% in attractive agri-businesses.

The AGRI Fund has been established by BT Funds Management, which is a wholly owned subsidiary of Westpac NZ, and by rural syndicate specialist Agricultural Investments Limited (AGInvest). The offer closes at 5pm on 3 August 2007.

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