Survey finds financial investors respect family farming, want government to prioritise R&D

Potential investors in Australian agriculture respect family farming, are deterred from investing by the country's climate variability and believe Government should prioritise research and development over infrastructure initiatives, according to a report on the results of a survey of investment professionals released today.

The Allens and Mergermarket survey, A greater yield: Attracting investment into Australian agribusiness, has found that foreign and domestic investors are highly attracted to investing in Australian agriculture, but that barriers remain to the sector attracting more investment.

The survey of senior Australian and offshore investment professionals found that:

• Proximity to markets was the main attraction for investing in Australian agriculture (favoured by 76 per cent of respondents), followed closely by the quality of infrastructure (67 per cent) and surplus production for export (61 per cent).
• Climate variability was by far the greatest disincentive for investing in Australian agriculture (identified by 72 per cent of respondents), followed by wages and other input costs (61 per cent), and taxes (44 per cent).
• 47 per cent of respondents agreed that the family farm was an appropriate model for the future of Australian agriculture. A similar number of respondents expressed interest in pursuing joint ventures with farm operators and, of those respondents, 59 per cent would not insist on majority ownership as a condition to their investment and 85 per cent would want to offer earn-in incentives for the farm operator.
• 99 per cent of respondents were aware of the Federal Government's decision in 2013 to block Archer Daniels Midland from acquiring GrainCorp, although 60 per cent of respondents said the decision did not negatively impact on Australia's reputation as an attractive place to invest in agriculture.
• In terms of government spending priorities, 45 per cent of respondents said that research and development needed the most urgent government attention, followed by irrigation infrastructure (20 per cent).

'The Federal Government is currently engaging with industry stakeholders as part of its development of an Agricultural Competitiveness White Paper. Farmers, traders, supply chain participants and local communities, have rightly had their voices heard,' said Marcus Clark, Partner and Allens Agribusiness Industry Leader.

'However, we have not heard all that much from domestic and offshore financial investors, and it is their perspective on issues such as foreign investment regulation policy and preferred funding models for the sector that are vital if we are going to put in place a structure that will allow the agribusiness sector to achieve its full potential.'

He said that two of the major focuses of the survey were to learn about preferred funding models and hear investors' thoughts on the viability of the family farming model.

'The family farm has driven the agriculture sector in Australia for nearly two centuries, but there are now serious stresses and strains on that model,' Mr Clark said.

'Still, many financial investors saw advantages in family farming including the maintenance of strong rural communities and leveraging of local knowledge. They also expressed a preference for accessing these advantages through joint ventures.'

Mr Clark said that the joint venture model offers a way to overcome many of the constraints of family farming, such as over-reliance on debt and the barriers to entry it imposes on young farmers, while retaining the basic concept of family farming with the farmer as an owner.

Mr Clark said that one of the more surprising findings of the survey was that many of the respondents pointed out the need for government to prioritise research and development over infrastructure initiatives.

'We thought this surprising because much of the debate in Australia in recent years has been around the need to drastically improve built infrastructure. Yet 67% of respondents said Australia was an attractive place to invest because of its good infrastructure.'

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