Farming needs major investment boost

That was the message from ANZ head of agribusiness Mark Bennett as he outlined findings from ANZ's Australian Agriculture - Funding our Future report at Wongan Hills last week.

The Funding our Future Report leverages from ANZ's 2012 Greener Pastures Report that noted Australian agriculture faced a capital gap of $1 trillion by 2050.

According to the Greener Pastures Report, demand for the country's agricultural produce is predicted to increase by 77 per cent by 2050, an increase of 1.3pc per year.

Mr Bennett said the industry faced a challenge to reach its export potential before its global competitiveness lost ground.

"Australia has the potential to enjoy a strong period of growth over the coming decade and longer, particularly when we consider the demand from our export markets," he said.

"While we are already seeing capital come into the sector, a sustained injection will be required to realise this potential and to drive productivity gains through on-farm infrastructure, new technologies and innovation.

"Effectively, we're not making enough money in farming at there-investment rate to fund that level of investment that we need to make the most of the opportunity that's there."

The Funding our Futures report highlighted that ownership structures in the Australian agricultural sector had remained largely unchanged over the past century.

According to ANZ statistics, nine out of 10 Australian farms are owned by families, with the majority holding some form of debt.

Mr Bennett said it was essential that new types and sources of funding evolved to keep producers competitive, such as institutional investors, pension funds and foreign investment sources.

"We do talk about the need to move beyond retained earnings and bank debt in a traditional sense, as a way of bringing industry to a greater level of fulfilment," he said.

"When you think about what are the other forms of capital that would potentially bridge this gap, this is where you move into a corporate farming fund or foreign kind of landscape.

"Something needs to give in order to create a bigger capital flow from perhaps Australian super funds and corporates who can play an effective role in funding the capital gap within Australian agriculture.

"Not to say that they will take away from family farming as a main-stay but I think there's a lot of health that can come from this kind of investment."

Mr Bennett said there was no single solution for producers to solve their capital constraints, due to the diversity of Australian agriculture in terms of farm size, scale and productivity.

"A common catch cry which I think plays true to the WA landscape may be more than anywhere, is get big or get out," he said.

"What we're trying to pose here and have a look at is some of the industry composition, to say that not everyone can just get bigger and therefore better, there's going to be more to it than that."

Mr Bennett said small operators made up 50pc of Australian farming enterprises, with an average turnover of less than $150,000, while corporate producers made up just 2pc of operations with a turnover of more than $1.2m.

He warned small operators were in danger of becoming unviable and needed to consider alternative options to stay competitive.

"If you look at the numbers, we've got about 124,000 farmers in Australia, on trend out to 2050 that number is closer to 80,000 farmers, so 40,000 farmers in Australia on trend won't exist in 35 years.

"If you're not heading towards scale, you've got to heading towards how you're going to improve your revenues because costs are going to catch up and they're going to beat you.

"Another consideration is around the way you take goods to market and the way you sell. Can you sell nearby verses bulk commodity? Can you sell online? Can you plug into agri-tourism and retail?"

Mr Bennett said structural change in the industry would create new opportunities, with capital providers looking to identify and partner with good farm managers and businesses.