Corporate farming. It’s the latest buzz word within the grains industry.
Despite corporate dollars being invested, however, some in the industry think the best people at growing a crop are still family farmers.
And there are a number of different models that can be used, as was outlined at a forum at last week’s Birchip Cropping Group (BCG) main field day.
Between them, the five speakers packed some serious clout, cropping over 750,000 ha and producing an estimated 7-10pc of the country’s wheat crop.
The panel members were:
• Chris Brooks managing director of Glencore grains,
• Andy McBain managing director of AACL,
• Lachlan Beaton from Warakirri,
• Local farmer, Andy Delahunty and
• Trevor Stoney, a farmer from Western Australia.
Each panel member presented a different method of investment into agriculture, from private ownership of land, leasing land, co-investing in inputs to investing outside capital into the owning and growing of grain.
Mr McBain said the concept behind AACL came about after seeing the millions poured into managed investment schemes for timber and horticulture.
“There are some good rates of returns for investors in the grains industry,” he said.
AACL supplied over $65 million to finance the cropping programs of farmers, in a model run along share-farming lines.
Mr Brooks said that his company had been attracted into the grain sector by the simple premise of making money.
“We still think the best people at growing a crop are family farmers,” he said.
“We can work with farmers on various arrangements and come up with something that is pretty attractive for them.
"But the bottom line is that we are in it to make a dollar.
"By producing a product we can market at over $300/tonne for $150/t – we can obviously do that.”
He said Glencore was involved in leasing and purchasing land that fitted specific criteria.
“We do an audit before we get into an arrangement with a farmer to see whether the proposition is attractive," he said.
“Some areas fit the bill and others don’t.
"We like the Mallee and believe it is good value.
"But we see the Western District as too dear, at $3000 an acre, and far western NSW as too risky, even at prices of $150/acre.”
Mr Beaton said that Warakirri worked on owning land and employing managers to run the properties over a wide geographic spread through NSW, Queensland and Victoria, investing equity from large superannuation funds.
As such, properties must yield an appropriate yield to compete with the wider market.
“We work on trying to get a return of 7pc on return on capital," he said.
“Any capital gain we get from rising land prices is incidental.”
The key to Warakirri’s success is the geographic spread, which Mr Beaton hopes to expand further, as well as further develop alternate income streams such as the company’s dairy interests.
Murtoa,Vic, farmer Andy Delahunty said that his family farming business was trying to model itself on corporate lines and get some economies of scale.
He said recent increases to the cropping program through leasing and share-farming arrangements had dropped the cost of production by $70/ha through efficiency gains.
While the lifestyle factor is often cited as a key factor for family farms, Mr Delahunty pointed out that the family farm structure leaves farmers poised to make returns that stand up in any market sector.
“We’re looking at making two and a half times as much per hectare as we did in 2005.
“It’s an exciting time to be involved in the grains industry.”
Mr Stoney, who crops 25,000ha over a wide area of WA, and has moved around chasing farming opportunities over the past 40 years, welcomed the influx of investment dollars into cropping, saying it gave farmers a real chance to offset their risk.
“The AACL share-farming model was the first real risk management tool we got to use, apart from spreading our program geographically,” he said.
He said that croppers must be prepared to work with outside investors and also get into the business of crop production, rather than land accumulation.
“We’ve got to make the most dollars from the enterprise, not buy more and more land – there needs to be ways to get into the industry without the monstrous amounts of capital required to buy a place.
“As an industry, we have to stop thinking of owning land and replace that with long-term access to land, whether that’s through a leasing or share-farming arrangement or whatever.”
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