Transcript Slide 1
The Future of Corporate Agriculture David Sackett Growth Farms Australia 14th Sep 2012 Growth Farms Business $320M under management – 190,000 sheep – 15,000 cattle – 17,000 ha winter crop – 10,500 ha summer crop Cattle Cropping dryland Cropping Irrigation Sheep Farm Locations Properties Staff Office Acquisitions • GF works with agents and clients to – Develop strategy for Australian ag. – Search for & evaluate opportunities • Business plans • Financials – Negotiate acquisition of land, plant , stock, water • Two factors drive investment performance: – Purchase price – Management What is Corporate Agriculture? • Run as an incorporated entity? • What isn’t it? – Everything other than small-medium scale family farms • Large scale family farms (>$10-20M invested?) • Institutions eg super funds • Foreign/city investors. Track record of “Corporates” • • • • • • Great Southern AACo Stanbroke Prime Ag Tandou Consolidated Pastoral 1500 Individuals - Corporates • • • • • • Medium to high net worth incl Family offices Australian and overseas $3-$30M, some >$50M investment Long term view Australia low risk (laws, economy, politics) Usually need help with acquisitions and management Institutions – (super funds etc) • Long term view (but act short term) • Australian institutions have little interest – Fragmented – Unprofessional – “Gloom and doom” – Low operating yield – Volatility Is Big Better? Operating Return (%) 2.5 2.0 1.5 1.0 0.5 0.0 Smallest 20% 300 hd 20 to 40% 1000 hd 40 to 60% 1900 hd 60 to 80% 3300 hd Largest 20% 7500 hd Source: ABARE Is Big Better? Pros and Cons “Family Farm” “Corporate” Flexible Patient capital Nimble Constrained by scale Lifestyle and business Skill level? Often capital constrained Governance? “Outside” constraints Specific targets (inflexible?) Can be poorly responsive Scale often not a constraint Business approach Access to expertise Capital available Governance? Investment Options Own land and Lease to Operator Own land and Operate Lower yield – 2-4% Consistent return Effect on land value/growth? No direct exposure to prices No working capital Higher yield – 4-6% More variable return More complex Provides price exposure Need 20-30% working capital Maximises capital growth Australian v US Land Values Index 100=2006 180 US 160 140 120 Australia 100 2006 2007 2008 Year 2009 2010 Foreign Investment “Any measure that puts further barriers in place….. and reduces the flow of foreign capital into Australian agriculture will adversely affect the performance of the agricultural sector. “ ABARES 2011 Foreign Investment In Agriculture • 1% of entities • 11% of land • 9% water • Largest in 09-10 was US, then Malaysia, then UK Foreign Investment In Agribusiness • 50% milk processing • 60% sugar refining • 40% meat processing • 50% of wheat exporters Good or bad? • Introduces capital – AACo – Vestey • Introduces technology – Chaffey Bro’s – Us Cotton farmers • Foreign investment +15% GDP Choice • Open, dynamic, competitive helped by foreign capital OR • Less productive, lower land values, less dynamic? A good agent (a buyers perspective!) • Well informed – High level – Detail • Straight • Value v Price • Responsive In summary • Agriculture will become more “corporate” • Life style and off farm income will underpin many small farms. • There is much more foreign investment in agribusiness than in agriculture • Foreign capital helps underpin new technology and improved productivity.