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 Acquisitions
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. What is Corporate Agriculture?
Great Southern AACo Stanbroke Prime Ag Tandou Consolidated Pastoral Track record of “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 Individuals - Corporates
Long term view (but act short term) Australian institutions have little interest – Fragmented – Unprofessional – “Gloom and doom” – Low operating yield – Volatility Institutions – (super funds etc)
“Family Farm”“Corporate” Flexible“Outside” constraints Patient capitalSpecific targets (inflexible?) NimbleCan be poorly responsive Constrained by scaleScale often not a constraint Lifestyle and businessBusiness approach Skill level?Access to expertise Often capital constrainedCapital availableGovernance? Pros and Cons
Own land and Lease to OperatorOwn land and Operate Lower yield – 2-4%Higher yield – 4-6% Consistent returnMore variable return Effect on land value/growth?More complex No direct exposure to pricesProvides price exposure No working capitalNeed 20-30% working capital Maximises capital growth Investment Options
“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
1% of entities 11% of land 9% water Largest in 09-10 was US, then Malaysia, then UK Foreign Investment In Agriculture
50% milk processing 60% sugar refining 40% meat processing 50% of wheat exporters Foreign Investment In Agribusiness
Introduces capital – AACo – Vestey Introduces technology – Chaffey Bro’s – Us Cotton farmers Foreign investment +15% GDP + Good or bad?
Open, dynamic, competitive helped by foreign capital OR Less productive, lower land values, less dynamic? Choice
Well informed – High level – Detail Straight Value v Price Responsive A good agent (a buyers perspective!)
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. In summary