Nicoletti to sell WA farms

02 Mar, 2015 05:15 AM
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John Nicoletti has no regrets on his decision to sell.
It's been four years, it's a big 'if' ... everyone runs out of patience, even farmers
John Nicoletti has no regrets on his decision to sell.

WESTERN Australia's biggest grain grower John Nicoletti is downsizing in a radical business transformation.

Nicoletti is not only the largest player in the Western Australia's $3 billion grain export industry, he is the nation's biggest single grain exporter, when his crops are healthy. It would put him in the box seat to benefit from the potential boom for primary producers as hungry, wealthier people in Asia trigger growing demand for grains.

“If we get a couple of good seasons the debt is gone - but how long do we wait for?”

As wealth rises, so too does consumption of protein. This in turn drives demand for grains. It takes 7 kilograms of grain to produce 1kg of beef.

Nicoletti says he's been hearing talk of a "food boom" for decades. It may just happen, he says, but it will be too late to save his farms from the chopping block. So disillusioned with the massive debt he has been unable to shift in the past few years, he has decided to sell off all his farms.

"If we get a couple of good seasons the debt is gone - but how long do we wait for?" Nicoletti says.

"It's been four years. It's a big 'if'. Everyone runs out of patience. Even farmers."

He argues you don't have to own the farm to grow wheat and barley. The sale includes options for Nicoletti to lease back the properties or manage them.

FIRB changes undermining market

There's been strong interest in his land, he says. But he's fuming that some parties may now be scared off after the federal government in February said from March 1 the threshold for foreign buyers purchasing farm land that would need approval from the Foreign Investment Review Board (FIRB) would be cut from $252 million to $15 million.

The changes come into effect a month before bids for his farms are due to close.

Nicoletti is hoping to attract $60 million, although others in the market think he may achieve about $40 million.

Either way, Nicoletti's farms could be some of the first to require FIRB approval under the new thresholds.

"All it does is reduce my ability to achieve the best price," he says.

Even so, Nicoletti is confident of a sale and says about 60 parties have expressed interest.

"A lot of properties on the market, you can't run stock on them or there's a weed overburden and they're a bit neglected, but our place is ready to go."

Still waiting for rain

Nicoletti loves his farms but he's tired of waiting for the much-needed rains that would, almost overnight, change his fortunes drastically.

The rains have danced past his properties, much of them in marginal country areas around the central wheatbelt town of Merredin and north of Geraldton. However, they've drenched the paddocks of other farmers in more reliable areas. Last season was the fourth-biggest harvest on record and the year before was a record.

"The eastern wheatbelt is fantastic country; it just hasn't rained," he says. "There are some wealthy people in that marginal country because the recovery [from drought] is so great."

Nicoletti is adamant he's not being forced to sell. Instead, it was the realisation that after a year of having just one property on the market - Daisy Downs near Geraldton - he'd still be left with a debt to his bank, ANZ.

"I'm not a forced seller. It's not a fire sale," he says.

Nicoletti has had a prickly relationship with the bank. Before the 2013 planting season he threatened to plant no crop in response to tightening credit conditions from ANZ. He says his relationship has improved. The bank is supportive and he wants to tidy up the debt load.

His children, who operate farms, are not in a position to buy his properties.

"You get to a point in life at my age that you just don't want to have debt any more. It creates a bit of pain around the kitchen table."

The right time

He feels the time is right, especially given the increasing talk about a "food boom" as demand for produce, particularly from increasingly affluent Asian consumers, rises.

Billionaires Andrew Forrest and Gina Rinehart have bought cattle stations in the past year and are investing in related processing assets.

"I've been hearing about this agriculture boom for 45 years and I'm only 61 so when will it happen? Hopefully it is going to happen," Nicoletti says.

Nicoletti has some leased properties he will continue to farm. He is also offering to either lease back his farms or manage them for the buyer, although buyers can purchase the farms outright.

He also has six John Deere farm machinery businesses.

'Fortune favours the brave'

Nicoletti has been farming in Western Australia since his early '20s when he returned to Australia to manage the family's farms after spending a decade in Italy, initially to go to school.

He managed to work with the family operation for just 10 months, which he jokes was 12 months too long. He left with just a couple of hundred dollars in his back pocket and leased the land next door to his father's farm.

A quarter of a century later, Nicoletti has amassed a farming empire spanning 145,000 hectares. His farms stretch from Daisy Downs north of Geraldton, through the eastern wheatbelt and down to Esperance at the very southern tip of WA. He has quit leases around Esperance but retains a 2000 hectare property where he grazes sheep and cattle.

In 2008, he was boldly planning to plant the nation's single biggest grain crop - 100,000 hectares.

Dry weather early in the season cut the crop to 84,000 hectares and the poor conditions persisted. "I don't call it gambling, it's calculated - but unfortunately I can't pull the string and make it rain," Nicoletti says.

"I run where most people fear to walk. My motto has always been fortune favours the brave, or nothing ventured, nothing gained."

The gregarious Nicoletti has made plenty of mistakes along the way.

Perhaps the biggest was putting his faith in a friend, who would use one of his properties to grow marijuana plants in the 1980s.

His friend got caught and Nicoletti ended up going to prison, serving 16 months of a five-year sentence.

He says he had no idea about the marijuana plants and got "stitched up".

"What hurt me the most was I got called Mr Big," Nicoletti says. "I've never smoked a cigarette, I've never in my life smoked a joint. That really hurt."

Nicoletti knows he probably shouldn't be telling The Australian Financial Review about his stint in the slammer, but he does enjoy a chat.

"I have no regrets," he says of his decision to sell up. "Some people may say he deserves it. I don't think so. Just because it hasn't rained, no one should be happy about it."

Food production undervalued

He's also unhappy about a growing number of Australians who don't value food production and politicians who he argues have given up on agriculture.

"We are down to 4000 farmers [in WA] of which 500 to 600 of them grow 80 per cent of the grain," Nicoletti says.

"There is a disconnect now because there are so few farmers to the people in the city. They [city dwellers] forget about input costs, the cost of machinery and how hard it is to get good labour out there.

"They just think the bread just pops from trays. They don't realise it starts out there. We have to seed it, look after it, spray it , deliver it to Perth and then ... our bakeries.

Treasurer Joe Hockey's decision to block a $3 billion takeover of GrainCorp by Archer Daniels Midland in 2013 infuriated Nicoletti.

"They were going to spend $250 million on infrastructure and they still said no.

"So if we have a government that thinks like they do, you think we have any chance at all in agriculture?"

His view is in stark contrast to many growers on the east coast, who fiercely opposed the takeover and gained infleuntial support from Nationals and rural Liberal MPs, including Bill Heffernan. The rejection of the bid left business leaders gobsmacked.

Nicoletti's stance softens though when he's asked what's the best thing about being a farmer.

"Knowing that I've planted a seed and that if it rains and I look after it, nurture it, and harvest it then I feed the world," he says. "It's a buzz. It has never been the money."

AFR
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READER COMMENTS

wtf
2/03/2015 11:38:39 AM

As if the FIRB changes will deter overseas buyers (not investment), however he obviously realises that its primarily offshore buyers that can make the current rate of return work and one has to wonder why?. Again he has demonstrated that failsafe idea (sarc)that listed companies will return their profits to farmers. In the short term they might, but once they have their position locked in there will be no onus to do so. I have yet to be charged less for freight by a carrier with a brand new truck, as opposed to an old s-line with it paid off.

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