Traditional farms a top investment alternative

28 Jun, 2000 11:07 AM
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THE WA broadacre farming community has been urged to prepare to attract a greater level of corporate investment. While investment in horticultural and alternative livestock enterprises has increased apace in the past decade, broadacre pursuits remain outside the scope of many corporate investors. Kerry Smart, a consultant lawyer specialising in commercial loan and public capital raising, said there was potential to revolutionise traditional farming with the entry of corporate investment to large scale Wheatbelt farming in WA. He said the stability of successful farming operations, and the ability to sustainably develop traditional practices and markets, could provide lasting attractions for St George's Terrace investors. He pointed to the ability of many alternative agricultural investments to attract capital, when an enterprise could be based on a product or market that was not currently established. He told the AAAC conference in Perth last week tax effective investments in agricultural pursuits should be made only after rigorous inspection, and determination that: pan established market existed; pthe water/land/infrastructure resources existed; pthe assumptions of the enterprise were realistic; and pthe correct management skills were in place. He said the structure of many prospectuses for alternative agricultural investments made direct comparisons difficult, with the return per hectare often obscured by other material. The history of investing in alternative enterprises in Australian agriculture was littered with spectacular failures, with a boom and bust cycle affected many new ventures. As an industry developed, and market prospects grew, some investors rushed to become involved, pushing up the price of entry for all. The bust often came with oversupply of a market, or the inability of an industry to transform from a breeding and re-selling phase to a commercial footing. Mr Smart said the knowledge surrounding traditional farming, compared with the speculation that often surrounded new enterprises, should help attract investors for Wheatbelt farming operations. "Agriculture ought to be a good investment ‹ it deserves to be a good investment," he said. "However, it has to be based upon realities." He warned of the prospect of prosecution that was growing in the farm investment sector as new industries were established with predictions that were "too bullish". He said he expected "sooner or later" a class action based on evidence and reports surrounding a prospectus that later turned out to be unrealistic. He called on WA agricultural advisers to take a stand to ensure investment in agricultural pursuits were sustainable, by maintaining a high ethical standard in advising clients or contributing to promotional material surrounding new industries or enterprises. (Mr Smart is involved in three vineyard projects in WA, with interests in another vineyard project in northern Victoria. He is also involved with a group of investors who have established 700ha of bluegums in WA.)

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