After years of bullish forecasts, the reality of a huge wealthy Asian middle class has arrived and is starting to exert a powerful influence on Australian agriculture.
Merely flogging stuff to Asia is not how we should greet this opportunity. We have a bigger, more worthwhile challenge: building markets that allow us to put new foundations under our agriculture sector here — new infrastructure, new investment streams, and management practices that support environmental and economic sustainability.
I recently had the opportunity of questioning some experienced people on this challenge when I hosted a forum sponsored by venture capital firm Blue Sky Funds, which has a vigorous agricultural investment arm.
On the panel were Damien Webb, head of income and real assets at First State Super; Clinton Dines, who spent 36 years in China, including 21 years as head of BHP Billiton’s China operation; Peter Corish, former National Farmers Federation head and CEO of PrimeAg Australia; and Kim Morison, managing director of Blue Sky Water Partners.
What is happening in Asia should allow us to hit “reset” on Australian agriculture, and fund a rapid shift from profits built on commodities to profiting from value-added branded products.
Mr Dines spoke of the need to build branding programs supported with quality control measures, in a way that supports re-investment in better quality control.
So where will the money come from? Increasingly, it will need to come from sources other than bank debt.
The sector is ripe for investment, Mr Morison said, and the money is starting to flow, but flawed perceptions of the agricultural sector are stifling increased levels of investment.
About 15 per cent of Australia’s farm businesses generate 80pc of the sector’s profits and own 80pc of the assets, he said.
That top 25pc of farm businesses generate similar returns on investment to Australia’s super funds, but that message is lost in the perceptions of the ageing of Australia’s farm sector, which are flawed, Mr Corish said.
Those who own the land are an ageing demographic, but those who manage agricultural production are increasingly young and well-educated.
It will also be up to agriculture to make the case for retirement funds. He also mentioned criteria for super fund investment I haven’t heard before: “We want to create a better world for our members to retire into”.
Assets, ideas, relationships are all important, but ultimately, Mr Morison said, the decision to invest in a venture is based on people.
Seizing the Asian opportunity will require thought and capability across many areas, but if there is a signal in the noise, this is probably it: start with great people.
- Robbie Sefton has a dual investment in rural Australia as a farmer and as managing director of communications company Seftons.
