Corporates can't replace family farms: Sackett

10 Jun, 2014 02:00 AM
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23
 
He said corporate agriculture would never take over from family farming in Australia

THE financial performance of corporate agriculture in Australia is “hopeless”, according to leading farm management consultant, David Sackett.

Among the key reasons for corporate sector’s poor track record is an obsession with buying very large properties, often paying well over the odds to get them, coupled with an impatience in achieving returns on investment.

Australian agriculture was a low-margin, long-term business and corporate investors should be looking to copy the management practices used by Australia’s best family farmers to produce profits, he told a seminar in Canberra last week.

Speaking to a room full of rural and agribusiness heavyweights including representatives from both family and corporate farms, Mr Sackett said he had crunched the numbers on nine corporate entities (which he didn’t name) involved in farm production in Australia and the majority were producing negative results for their investors.

He said corporate agriculture would never take over from family farming in Australia but it would make a more profitable and productive contribution if it adopted some of the key features of Australia’s top family farms, including their "lean and mean" attitude to spending, their long-term view of agriculture and their flat and responsive management style.

The seminar was organised by the Australian Farm Institute to examine ways to fund the future of Australian agriculture.

Mr Sackett is managing director of Growth Farms Australia, which has purchased $200 million worth of farm property in the past three years on behalf of clients, including some based overseas, and has $350m of farm assets under management.

Ideally, his company sought to buy good farms for clients at prices 20 per cent under the market value.

He believed corporate investment in Australia would continue to grow on the back of growing global food security concerns and as a natural hedge against inflation and to spread risks beyond equity markets.

And he predicted more superannuation funds would flow into agriculture and Australia was an attractive destination because of its political stability and because our agriculture was generally profitable without the need for government subsidies.

Some corporate investment decisions were also driven by ego and the romance of owning a station the size of a small European country, he said.

Many corporates wanted to invest directly in farms, he said, and they wanted big farms although there was no evidence that large properties were more profitable than smaller ones.

By paying 30pc above ruling market values for farms, corporate investors were also kissing goodbye to five years or so of capital gains.

Mr Sackett said corporate ag investors also needed to be much more in tune with the people who managed their land.

Australia needed both patient corporate investors and patient farm managers to achieve the best long-term returns.

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FarmOnline
Vernon Graham

Vernon Graham

is the group editor of Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

wtf
10/06/2014 5:44:45 AM

And there U have the reason why farmers have disengaged with farm organisations. They do not represent the farmer, they are thinktanks to deliver megacorps messages. Stop using the word farm, U do not represent us and never will
wtf
10/06/2014 5:55:33 AM

Interesting to see this hot on the heels of the defence of the state owned Hassad article. Like it, there is no mention of the impact of printed money which has no accountability, on the market. Even a 20pc reduction will not be in alignment with earning potential for many areas. Your very presence in the market is not letting the market realign. The other main problem is 70pc equity, it is beyond most families when it comes to succession. Values need to realign to a point without state backed finance putting a guaranteed min price in the market, as that distorts the market.
nswnotill
10/06/2014 6:48:17 AM

I agree with David Sackett. In my opinion, the best model is what I term the 'corporate family farm'. This is a relatively large operation operated by an extended family unit, sometimes with paid staff as well. Different family members are responsible for various enterprises such as grain, livestock, irrigation, intensive feeding etc. The extended family prospers in good years, and rides out the poor years in 'care and maintenance' mode. Family succession planning ensures that the outfit survives in the long term.
John Newton
10/06/2014 6:48:51 AM

Efficient sustainable and thriving small farms will feed the world, not agribusiness.
Gecko
10/06/2014 7:26:47 AM

The agriculture sector is facing a dilemma; we need corporate style farming to survive. There is simply no alternative as the "family" farm we know is fading away. Sons, (and daughters) are just not interested to continue working on the farm (even managing the farm at a distance). So what happens to farming in Australia? It is similar to the argument about foreign investment. We simply cannot do without it. (Despite billions of dollars under the control of Australian Super Funds, they will not invest into Australian Ag).
themule
10/06/2014 7:27:27 AM

Brilliantly written and so true. The big corporate farms are only good for one thing and that is keeping property prices up. Most of the corporate farms are trying to be run like city corporates with massive wages for the "suities" flying around in new RM Williams boots and no idea about the day to day and who is actually running these properties. The profits are just not there for everyone at the top to be earning big wages and paying their on farm staff nothing. At least when the properties are handed back the infrastructure will be in better condition and someone can farm it profitably.
genazzano
10/06/2014 8:03:51 AM

Those who invested with Macquarie Ag arm will have a long wait or maybe never
Percy
10/06/2014 9:49:11 AM

Maybe Mr Sackett can come up with an idea about how to get young farmers onto the land because there is no way any young person has a hope of starting up a viable enterprise without assistance or inheritance; unless they win tatts and keep farming until it is all gone.
TheOldJoke
10/06/2014 10:05:01 AM

You're right Percy. How many young people can afford a multi-million dollar property to start out? Take out a loan? WIth what collateral??? When do they make it out of debt? When they die? The old joke seems relevant: -"How do you make a small fortune farming?" -"Start with a big one!"
Bulldust
10/06/2014 11:51:30 AM

I would like to see the government make a stance on agriculture, if the world is going to take us seriously the government needs to step in. The banks need to change there lending policies like NZ we need to be able to borrow up to 80pc of the value of the land and 100pc value of the stock. There is money to be made as a country we just need to get serious. Support from the banks, support from the processors and support to the suppliers. As for super funds lets look long term investment 20 plus years rather then 5 year outlooks.
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