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.