Rural properties come on line for sale all the time, but increasingly they may come with the added benefit of carbon sequestration credits.
Packhorse Pastoral’s three large pastoral stations in Queensland and NSW have come to the market following the passing of co-founder Tom Strachan.
The stations are an example of carbon sequestration farms with carbon credits in place which will provide capital for better land management such as carbon storage.
The buyers are expected to come from either of two distinct camps – family farmers or corporate farmers investing in expansion after a strong growing season, or large financial institutions such as super funds that have made commitments to have carbon neutral investment portfolios.
Spanning 27,124 hectares (67,025 acres), the properties come with registered soil carbon methodology in place, baselined over the past 12 months, implemented by Carbon Link.
The strategies to maximise carbon sequestration include time-controlled, rotational grazing methods and the introduction of perennial grasses and legumes.
Expected price is more than $120 million, according to CBRE’s David Goodfellow and James Auty who are managing the sale.
All three properties – the 8344ha Stuart’s Creek Station, the 10,029ha Moolan Downs Station, and the 8371ha Ottley Station – are currently used for cattle grazing under a “grass motel” agistment agreement with one of Australia’s largest cattle producers.
The Fifth Estate understands the Stuart’s Creek Station property was purchased in March 2021 for $27 million from cattle breeder John Galwey. The purchase was backed by an investment from Terry Snow whose Capital Airport Group owns Canberra Airport.
“Packhorse have done a lot of work to get started in carbon projects, while other companies are feverishly learning and looking. The money is already invested.”
“Interest is coming from different corners right now,” Goodfellow told The Fifth Estate. “There are a lot of farms on the market right now, so corporates are competing for larger aggregations.”
He says the corporate interest, especially from superannuation funds which have investments in hard-to-abate sectors, is driven by net zero commitments.
“Packhorse have done a lot of work to get started in carbon projects, while other companies are feverishly learning and looking. The money is already invested.”
Andrew Gatenby, commercial director for Carbon Link – which registered the properties’ soil carbon farming projects – said there were not many similar properties on the market at this scale.
“Under the Emissions Reduction Fund soil carbon methodology, there’s 400 projects registered in Australia. That’s 300-350 thousand hectares.”
This investment is predicted to reap rewards – with a higher price point than equivalent properties without carbon credits in place according to CBRE.
There are around eight staff working on the properties who are expected to stay on after a sale.
Income from carbon credits
All the cleared and semi-cleared grazing lands and all the naturally timbered lands on the properties are subscribed to profitable carbon sequestration projects set up by soil carbon farming and modelling company CarbonLink.
It was part of a strategy to raise $1.5 billion over five years and create a two million hectare cattle grazing and carbon sequestration portfolio.
They are rated to carry approximately 13,600 Animal Equivalents (AE’s) and are used for growing-out cattle owned by the agistor.
The currently registered projects are set to produce an estimated 28,000 Australian Carbon Credit Units (ACCU’s) every year for the first five years, and up to 35,000 ACCU’s over the following five years.
At current ACCU prices of $30 to $40, the combined additional revenue is forecast to reach around $840,000 to $1.12 million a year.
Carbon credits are bought by governments and businesses as an alternative to cutting carbon dioxide emissions.
In five years an assessor will independently verify the properties against the baseline and the credits can be sold.
Packhorse Pastoral chairman Tim Samway said the company is keen to sell to buyers interested in continuing the “successful regenerative work the company has been undertaking on its properties” – whether it be a new partner or landowners who wish to acquire one or more of the properties.
“I think the key point that needs to be made is that the influence on land prices will be directly relevant to the income generated from the annual sales of the ACCU’s derived from that land,” Mr Goodfellow said.
An indicative benchmark in the current market, he said, is 10 times the annual sales of ACCUs, if other income-producing activities like cattle grazing is not reduced to make way for production of ACCUs.
“If cattle grazing land in an area was typically valued at $10,000 per AE and the stocking rate was reduced by 500 AE to make way for the production of 25,000 ACCUs worth $40 per ACCU, then the value uplift from ACCU’s of $10m would be offset by $5m reduction in value from reduced livestock production, thus providing a net increase in value of $5m.”
Carbon Link’s Andrew Gatenby said demand for carbon management was increasing.
“There’s a lot of demand. Registered projects increased 40 per cent this year. We have a goal of getting to 8-10 million hectares by 2030.”
Regenerative approaches in cattle farming
This comes as the Australian Competition and Consumer Commission is in the midst of a six-month investigation into Australia’s carbon scheme, with former Australian chief scientist and senior academic, Professor Ian Chubb heading the review.
In March this year the former head of the government’s Emissions Reduction Assurance Committee Professor Andrew Macintosh called the carbon market scheme “a sham”, stating that the majority of carbon credits approved did not represent real or new cuts in emissions and that it was a waste of taxpayer money.
Carbon credits can be grouped into two large categories or baskets: avoidance projects (which avoid emitting GHGs) and removal (which remove GHGs directly from the atmosphere).
Mr Gatenby said that greenwashing concerns related to forestry projects – which are modelled – and not soil sequestration.
“Soil is physically, independently measured – the criticisms do not apply to soil,” he said.
“We may see a tightening of the process. We have to make sure we are constantly optimising and improving.”
By making basic changes to farm management practices, Gatenby said farmers can create huge increases in carbon sequestration through storing carbon in the soil.
“For every kilogram of beef, farmers put away 50 kilograms of carbon dioxide. Regenerative agricultural practices sequester a significant amount of carbon dioxide, so overall agricultural sequestration will be a carbon sink,” he said.
Historically, these properties had livestock grazing throughout over 12 months of the year. This depletes the soil and causes erosion, not allowing time for the grass to regrow and sequester carbon.
To better manage carbon sequestration, the company introduced water points throughout the property subdivided into smaller paddocks so the cattle can be concentrated for shorter periods of time. This time-controlled, rotational grazing method stimulates plant growth and allows time for the paddocks to regenerate.
Perennial grasses were introduced instead of annual grasses – meaning that the grasses have a lifespan of 12-15 years instead of the standard lifespan of one year. Perennial grasses consistently take down carbon throughout the year into the soil, allowing for more plant growth and nutrients into the soil.
“We expect productivity gain as a result of improved soil and land management practices, carbon credits are a bonus on top,” Gatenby said.
Pasture improvement also includes planting legumes such as rhodes, digit, gatton panic, and desmanthus, which are high protein feed and also improve biodiversity, and draw down nitrogen into the soil so that less fertilisers are needed.
Louisa Keily, director of Carbon Farmers of Australia said the properties’ carbon projects were “an ambitious undertaking” on “high quality land”.
She commented that the level of credits registered for that amount of area was low and had the opportunity to increase in the future for a potential buyer, saying that the “situation has been cut short due to the death of the owner”.
Mr Gatenby said: “The agriculture of tomorrow is clearly part of the solution. Land, photosynthesis, and agriculture are the only ways to sequester carbon dioxide.
“We can avoid emissions, and stimulate plant activity, but livestock is a key part of it.”