Innovation in farm expansion

02 Feb, 2018 04:00 AM
 Nuffield Scholar James Dempster, Mingenew, has released his study into successful family farming expansion models.
Nuffield Scholar James Dempster, Mingenew, has released his study into successful family farming expansion models.

A GREAT opportunity for farming families to expand and diversify their businesses will exist as a significant amount of assets are passed onto the next generation when the baby boomers retire in the next decade.

That’s the view of 2016 Nuffield Scholar, James Dempster, who was supported by the Grains Research and Development Corporation (GRDC) to research the successful expansion of family farms around the world and to determine whether those expansion plans could be leveraged by off-farm investors.

As a family business the Dempsters operate a mixed cropping and sheep enterprise on 6200 hectares, a combination of owned and leased land, at Mingenew.

James and his wife Fiona, brother Tim and his partner Chela and parents Phil and Liz, who are in Dongara but still involved with the farm, work together cropping 5200ha of wheat, lupins and canola as well as running 1500 Merino ewes.

Mr Dempster said the business had undergone significant change over the past 10 years, shifting its focus from livestock to cropping to deliver increased profitability.

The Nuffield study topic was prompted by the family’s succession story with parents Liz and Phil retiring and moving off-farm, which meant adding a superannuation fund and transferring management to James and Tim, who both started their own families in recent years.

Having visited farms in North and South America, Europe and New Zealand, Mr Dempster’s report looks into some of the world’s best and most innovative examples of farm ownership, leasing and funding models.

He hoped what he had learnt could be applied by other broadacre farmers in WA who, like him, are faced with a similar challenge to “go bigger” so as to achieve better farm profitability.

“Farmers are becoming increasingly focused on the costs of production,” Mr Dempster said.

“This is compounded by climatic and price volatility in addition to the general cost of inputs and machinery.

“Research shows that expansion can play a key role in easing these pressures and boosting efficiencies on farm – but it’s not always an easy road, particularly for young farmers.

“The core of my research was to better understand how farmers around the world are acquiring land and embracing new funding models to reach their expansion goals and to introduce those ideas here.”

The report quotes GRDC research (K Sevenson, 2017) that 90 per cent of farm businesses in WA were owned by local families and have achieved their scale through a combination of bank lending, leasing and share farming.

“Our business is a combination of owned land, which provides security and equity and leased land, which helps to achieve scale and drive greater efficiencies without taking on enormous amounts of debt,” Mr Dempster said.

“We’ve found this to be successful for our business structure, but being strategic and disciplined is absolutely critical, as is seeking advice to ensure it’s the right path for a farm business to go down.”

He said there were several options available to farmers and adopting a more corporate structure might make it a smoother and more successful process to access finance such as equity partnerships and joint ventures.

“Attracting outside capital sources means a farm has to become ‘investor-ready’,” he said.

“There are a number of steps farm businesses can take to attract and retain investment and those doing it well have business plans, public liability insurance, good corporate governance, thorough records and historic industry benchmarking in place.

“In today’s age it’s also about having comprehensive human resource policies that foster a positive work culture, encompass health and safety procedures and demonstrate plans towards environmental sustainability.

“Many farm businesses are taking advantage of branding and online marketing, which is proving to be highly beneficial for small farming projects or niche products, particularly on private equity platforms such as crowdfunding.”

Mr Dempster visited a range of farms, corporations and equity groups from around the world, proving that there is no one size fits all approach, but said planning and risk management were absolutely critical.

“It’s about covering all your bases, from inception right through to an exit strategy,” he said.

“For instance, creating multiple income streams can be very useful when it comes to succession planning, particularly as a way of avoiding the sale or splitting of farmland.

“Teaming up with other farmers to pool resources to achieve common goals is another way to improve productivity and to build the empire.

“This has been highly successful on farms I visited in New Zealand where multiple farming families have come together to achieve economies of scale and, more recently, purchase additional land.”

For farmers looking for investors, Mr Dempster recommends connecting with farm management companies.

“There’s a lot of interest from institutional investors, but creating an equity partnership can be difficult, particularly if you don’t know where or how to find a financial partner,’’ he said.

“It’s provided a gap in the market for farm management companies, which find, acquire and manage farm land in a transparent manner that ensures the goals of all parties are met.

“While most offer a range of services to their clients, generally they partner with land owners to build investment-grade farmland portfolios.

“And it’s not just here in Australia.

“I met with the owner of a Canadian farm management company, who said there was great opportunity for his company to partner with existing farmers looking to expand or scale back, exit the industry, set up off-farm or create partnerships in other countries like Australia.”

To view Mr Dempsters final report visit port/ AU/2016/james-dempster or to watch his presentation go to watch?v=mQ7ART7vBHE



Screen name *
Email address *
Remember me?
Comment *


light grey arrow
I'm one of the people who want marijuana to be legalized, some city have been approved it but
light grey arrow
#blueysmegacarshowandcruise2019 10 years on Daniels Ute will be apart of another massive cause.
light grey arrow
Australia's live animal trade is nothing but a blood stained industry that suits those who