Opening the farmgate to investment

07 Dec, 2014 01:00 AM
Comments
19
 
That really negative attitude towards corporate investment has probably dissipated

AN EXCITING mix of farmer and external investment will be the key to driving agriculture in Australia forward, according to Rural Bank’s new board appointee Alex Gartmann.

Ms Gartmann, who is also the chief executive of Rural and Regional Renewal and spent nearly a decade at the helm of Birchip Cropping Group (BCG), said the financial industry serving agriculture needed to foster innovation to allow maximum returns from investment in the sector.

“There’s been a lot of commentary about whether the traditional family debt-driven model can raise enough capital to continue to bring the industry forward,” she said.

“The truth is, family farming will always be an important part of Australian agriculture, but we may see it linked in with other sources of capital in the future.

“Already we are seeing some innovative arrangements where family farms transition to a corporate style set up while still allowing facets of traditional family ownership, whether that be the farming business set up separately from land ownership or other models.

“It’s something that’s working for farmers wishing to free up capital and while it won’t be for everyone, it is something I think we’ll see more of in the future.”

She said the challenges in attracting external investment to agriculture, with its highly volatile income streams, would remain, however, capital was making its way into the farming sector.

“There is international investment and while I wouldn’t say it is as large as it seems according to media reports, with it comes opportunity.

“I feel the industry has become more mature than a decade ago when we were having these linear debates with corporate farming versus family farming and where there was no middle ground.

“That really negative attitude towards corporate investment has probably dissipated since then, and we’re now seeing the flexibility that investment can provide,” she said.

Regarding agriculture banking, she said a mixture of the major banks and niche players would continue to have a role.

“I think farmers will continue to have the choice of a diverse set of lenders.”

In terms of winning over risk-averse mainstream Australian investment into agriculture, Ms Gartmann said products such as multi-peril crop insurance (MPCI) on the risk management side and forecasting tools such as Yield Prophet, which was jointly developed by BCG and allows farmers to make predictions on yields according to current season conditions, would help.

“It’s all about minimising those really bad years, whether that be through crop insurance, or whether it is by lowering inputs if the forecast is less than optimum.

“You’ll obviously have years like this where it starts promisingly and falls away, but I see forecasting tools playing a valuable role in risk management as they become more and more sophisticated.”

Ms Gartmann said as agriculture became more in-depth, the skill sets required would become more specialised.

“I think we are going to really need a depth of knowledge, rather than breadth, so that may mean bringing in external expertise,” she said.

“Farmers will make decisions on who is in their circle of influence according to what skills they have and what they need to get.

“As farm businesses broaden in scope, keeping an eye on the specialised areas of the enterprise will become more challenging.”

“Having the best info and advice when they need it will be critical, especially with margins between success and failure so minute.”

Ms Gartmann said she anticipated the cycle of consolidation within farming was not yet complete, even though farmer numbers have declined by far more than expected over the past decade.

“It will depend on technological advances as to whether we can continue to do more with less.”

However, she said she was confident larger farmers with less employees would not mean less vibrant rural communities.

“As the number of people employed by the actual farm business diminishes, I see more people in that agricultural services sector, providing diversity throughout the community.”

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FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

wtf
7/12/2014 2:34:17 AM

More black is white rubbish. How about the banks, rather than trying to cover their own backsides for the problem they have created when they inflated land prices by the govt allowing them to create money on a computer (as opposed to the traditional method of reserve banking, ie using deposits), stop the inflation, let interest rates realise their true value and not look to corporates or other countries (who have recklessly ruined their own farmland) to get them off the hook? Funny how they can create money from fairy dust, yet we are 100% accountable and cant just wiggle our nose for more.
Qlander
7/12/2014 4:46:28 AM

Farming is a better return then term deposits (but only just). Instead of going to the banks for capital, farmers must start competing WITH the banks for capital.
Jock Munro
7/12/2014 4:47:12 PM

They should put this stuff to music! It might make giving up ownership and control of your property to a corporate more convincing. These people who spruik these ideas almost seem to suggest that if you throw enough money at a farm business it will prosper.
GFA
7/12/2014 7:29:38 PM

Very good thinking Ms Gartmann, However being more efficient and productive in the farming operation without changes to the input and supply chain costs and off farm infrastructure, will still hold back our local farmers from building the capital to match it with the big foreign corporates. This is because until we can get profits from farming up with other investment businesses, their wont be enough capital generation to keep attracting the investment necessary, by Australians in particular. Go with your ideas by all means but don't forget to deal with the inflated regulated labour costs!
Hydatid
8/12/2014 5:20:16 AM

Hey Jock...what's wrong with a Corporate?.....I've worked for Corporates before and they are some of the most professional farm managers I've ever come across !!
Deregul8
8/12/2014 5:57:46 AM

One thing is for sure, the ol boys club of agrarian socialists haven't got any money left to invest in creating more profitable and dynamic agricultural enterprises or for creating new more efficient supply chains post farm gate. They'll expect the taxpayer to carry their lazy behinds along. Fortunately for the free market embracers, the taxpayer is broke as well and opportunities down at the farm abound from this corporate and SOE push into Australian ag. Exciting times.
dunart
8/12/2014 6:16:30 AM

the farmer I know, and that's me included don't need capital investment. what we need a "cost of doing business" that reflects our world market income. the car industry, and others, can move off shore for lower costs. we can’t. Unless Australia realises this before it’s too late, we will have sold all our farms to investors, many of them overseas govt's for 5% to 10% of the real value of 40 years ago. How does a govt collect the wealth from an industry that is not selling commodities in Australia, hence never will make a profit? How does govt collect wealth from a company that imports
Qlander
8/12/2014 6:42:08 AM

Farmers tend to sell themselves short on investment performance. Mainly because they are used to dealing with the massive bloated parasite that is banking world. However if you take a middle of the road, listed corporation like QBE- it pays 2.4% dividend, and in the 20 years it's price has doubled from $5.60 to $11.13. Most farmland has more then doubled in price in the last 20 years, and who would like to be paying $24k on $1 million? If you need capital forget the banks, and go to the sort of people who are happy with these returns. Farmland is SAFE investment.
Dalby
8/12/2014 8:29:02 AM

What a joke the so called free market embracers are. Most of them are still wet behind the ears. What a hide they have. All the infrastructure in the grain industry, including the central silos & storage system, 95% of todays Port Grain Terminals & the grain quality systems and branding of our crops, was done with fees & charges against farmers incomes & not "on the back of tax payers". That was when we had unified well organized marketing arrangements & farmers were actually making enough money to build new infrastructure. Under "free trade" farmers get bugger all, but the traders do well.
Jock Munro
8/12/2014 8:41:45 AM

So is wanting to own your own land and work for yourself socialism deregular?
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