Despite its good market returns, growth capital is limited for the horticulture sector.
The CQuest Forestation and Carbon Fund, managed by MyFarm, is embarking on a fund raising drive, seeking an initial $15 million of investor equity to buy up to 1,500 hectares of land to plant in pine. It has secured contracts for the first two properties for purchase.
MyFarm chief executive Andrew Watters says most sheep and beef farmers will have land that is suited to planting trees and be able to directly gain exposure to increasing carbon prices. But for dairy farmers, acquiring suitable land is more difficult and not part of their core business.
CQuest offers an income from carbon credits and a hedge against the increasing price of carbon.
"We know that some form of emission charge is coming - either through the work being done by He Waka Eka Noa or the Emissions Trading Scheme. It makes sense for dairy farmers to plan ahead for this."
He Waka Eka Noa is the primary sector umbrella organisation that is tasked with building the knowledge on farm emissions and formulating and implementing an alternative plan to agriculture entering the Emissions Trading Scheme (ETS). This plan needs to be agreed by government by December 2022.
If the He Waka Eka Noa plan is not agreed, agriculture will enter the ETS in 2025, initially having to account for 5% of its emissions (increasing 1% p.a. thereafter).
Watters, who is also a dairy farm owner, says at today's carbon pricing and a 5% exposure to the ETS dairy farmers could face costs of 3 to 4 cents/kgMS - and higher at higher prices.
He says via CQuest, price exposure for 5% of emissions can be held at 1 cent/kgMS.
"While it's unclear what the impost of future carbon schemes will be, an investment in CQuest Fund is a simple way to mitigate the risk of rising carbon prices."
The fund envisages sequestering around 520 tonnes of carbon per hectare through the planting of pine trees, generating carbon credits at a cost of $20-25$/tonne.
As the trees grow to maturity, CQuest will sell the credits on the secondary market where carbon credit prices have been trading as high as $59/tonne.
The CQuest Carbon and Forestation Fund offer is open to wholesale investors with a minimum of $50,000 to invest. The offer closes Friday, October 8.