Farm industry players, frustrated by a general lack of long term outside investor commitment to their sector, may get better results by asking city money makers how an investment-attractive agribusiness should look.
The farm sector has often bemoaned the fact that Australia's $3.5 trillion superannuation industry is lukewarm about agricultural commodity market and seasonal risks, and shy about better at understanding the asset class.
The challenge is made harder by local super laws effectively requiring funds to adopt relatively "liquid" or short term investment strategies so members can quickly move their savings if needed.
Those investment constraints do not easily fit with farming's often unpredictable, short term market cycles and long term funding needs or growth rewards.
Let's get them (super funds) to think about, and talk about, what a good investment prospect should look like
- Ben Waters, FTI Consulting
"Maybe we need to build some pressure on superannuation funds and other potential investors," said food and agribusiness financial advisory specialist, Ben Waters.
"Let's get them to think about, and talk about, what a good investment prospect should look like."
Mr Waters, the Asia Pacific agribusiness head with global business transformation, strategy and investment advice group, FTI Consulting, said despite the good returns reaped by many who put their money into ag, "it's too easy to go looking elsewhere to invest."
He estimated 90 per cent of FTI's agribusiness advisory and support work involved family farmers, plus related supply chain businesses, who were "looking at how they can find a partner to help them grow".
Mr Waters was leading a discussion forum with meat industry executive, Anthony Pratt from Endeavour Meats, who questioned what agriculture was doing wrong.
'Ag is a good bet'
"How do we help them work out that taking a 10- or 20-year investment view in this industry is a pretty good bet?" Mr Pratt said.
"Anybody who invested in rural property alone has seen that result for themselves in the past 15 years."
He said "patient" capital's support in agriculture over a 20- or 30-year time frame was clearly working for overseas pension funds who had made big scale commitments to farmland and vertical agribusiness supply chain businesses in the past decade or more.
Meanwhile, with labour shortages a huge frustration for the agricultural producers and processors, Mr Pratt, believed more could be done by government to encourage retired workers to return to the workforce without penalising their superannuation nest eggs with additional taxes.
At the same time it was also wasteful to see a significant block of young potential workers not taking advantage of the sector's need for workers.
"We need to make it harder for this young generation cohort to be paid by the government and get them off the couch and into the workforce," he He told the NSW Farm Writers' Association event
Mr Waters said fortunately for agribusinesses looking for capital, Australian corporate superannuation funds worried about liquidity constraints were not the only potential source - self managed super investors, family trusts, private equity investors and overseas funds were also in the market.
"But the sector still needs to structure deals to make it easier for investors to come on board," he said.
In his experience, which frequently involved pairing farmers with investors, successful players treated investors like a business partner.
They also had a well planned agenda and were building on an already successful business model.
They recognised a growth plan must achieve more than just capital gains at the end, but also regular dividends for the investor to live on in the meantime.
"However, many people in agriculture are thinking about what will suit agriculture best, rather than thinking about what investors need from the arrangement," he said.
"Farmers tend to have a philosophy that an investment in their business is for a lifetime, or at least a couple of decades, but typical investors are more likely to be thinking of a shorter time frame.
"Ten years can be a long time for many."
Regardless of whether the business was a finewool grazing enterprise, mixed grazing and cropping, beef feedlot or Liverpool Plains grain operation, attracting investment would probably require farmers to show that the risks did not run their business.
"Capital backs people who are good at their job, not just good ideas."
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
