Farming face of the future

27 Feb, 2012 04:00 AM
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 Nuffield Scholar and Bruce Rock farmer Michael Foss (left) chats with fellow Nuffield Scholar and Gingin poultry producer Rob Kestel.
Nuffield Scholar and Bruce Rock farmer Michael Foss (left) chats with fellow Nuffield Scholar and Gingin poultry producer Rob Kestel.

CORPORATE farming is often seen as the enemy of family farms.

And while there remains a perception of Australian agricultural land being snapped up by big overseas companies, the Australian Securities and Investment Commission (ASIC) recently debunked claims of too much foreign ownership with figures recently revealing less than five per cent of Australian agricultural land was in the hands of foreigners.

But the subject won't go away, being magnified by food security issues and simple capital investment.

It was a topic that prompted Bruce Rock farmer and Nuffield Scholar Michael Foss to assess so-called corporate agriculture in North America and Europe on a Nuffield study tour last year.

He spoke about his study tour last week at the annual Nuffield Australia Farming Scholars Association sponsors luncheon.

Surprisingly, perhaps, food security wasn't the major issue he encountered.

"About 90pc of what I saw was about the land and companies factoring in large capital growth," he said.

"It was very evident in the United States where, in the last three to four years, agriculture has been returning more than 15pc to investors.

"So agriculture is now an attractive investment corporates are looking at.

"In the US, there are several pension-based corporates with one billion dollars worth of land assets, mostly in the US but also in Brazil and Australia.

"Most investment is for land investment and capital gain not food production.

"But in Canada, some corporate models are based purely on production because they can't own the land.

"Europe is seeing a swing to corporates where State-owned farming enterprises have dropped from about 25pc pre-1990 to 5pc post-1990.

"Corporates now control about 15pc of farming land.

"The co-ops also have dropped from 55pc (pre-1990) to 20pc (post) while individually-owned holdings have gone from 20pc (pre) to 60pc (post)."

According to Michael, corporate agriculture in now seen as more attractive than the share market, citing rising land prices in Australia moving from an average $500 a hectare in 1990 to a 2010 figure of $1900/ha for productive holdings.

He sees less emotion in owning land with the current generation of farmers, with more focus on improving gross margins.

"I have no problem with foreign ownership of land but basically it will be an issue for the government," he said.

"But I don't want to see land values drop."

The bottom line for Michael, however, is production and maintaining the strength of farming communities.

Why would a corporate want to go to Mukinbudin, for example?" he asked.

"Yet there should be a focus on keeping farming communities there.

"The issue is getting capital to keep them there and that's a challenge that includes governments."

For Michael, he has entered into a share arrangement with an investor to mitigate risk of a 15,000ha crop and livestock enterprise.

"Farming in WA is farming with risk, so I am happy to have an arrangement that shares the risk, rather than just leasing," he said.

"The biggest issue in farming is capital and it's a matter of how you inject capital to grow your business.

"It might be leasing the farm but staying on as farm manager and being paid to manage the farm.

"But I favour a more share farming model than a corporate model because I can retain a good measure of control while sharing the risk."

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