Capital drought places farming’s $100 billion vision at risk

A report out today by AgriFutures quantifies the capital drought constraining Australian agriculture’s growth and identifies the main barriers to investment.

The Capital requirements of Australia’s Agriculture, Fisheries and Forestry Sector report says the sector will need to find $87 billion in new investment this decade to reach the National Farmers’ Federation-led target of $100 billion in farm gate output by 2030.

The Report warns a continuation of existing investment levels would not see farm gate returns reach $100 billion until 2054.

NFF Chief Executive, Tony Mahar says the report is an important wake-up call for industry.

“Agriculture’s capital drought was identified in the NFF’s 2030 Roadmap as a major handbrake on the sector’s prosperity.

“If changes are not made to make investment in agriculture more attractive and fit-for-purpose, farmers will be hamstrung in their ability to grow.”

Prepared by Natural Capital Economics (NCEconomics), the paper cites inadequate benchmarking data, lack of scale, risk and liquidity thresholds as key barriers.

“Agriculture is one of Australia’s leading exporting industries, a feat it has achieved with little to no institutional investment. It’s difficult to think of any other industry that has achieved such scale through bank debt alone.”

Mr Mahar said the NFF’s 2030 Roadmap, identified the need to explore and promote alternative ownership and governance models to complement traditional debt financing, as a means of addressing both liquidity and scale.

“Also needed is a better understanding of FIRB requirements for both domestic and international investors and a proactive effort from agriculture to address the corporate social and ethical responsibilities of investors.”

More comprehensive benchmarking data is also required.

“Data compiled by ABARES currently does not meet the standard required by institutional investors, investment therefore is needed in the creation of more robust and timely performance data,” Mr Mahar said.

“Australian agriculture is poised for continual growth. To supercharge this growth, agriculture needs to attract investment from sources other than debt and equity finance. We welcome the report’s highlighting of these opportunities.”

“The NFF will use the findings of the report to advocate for the structural changes to ensure agriculture and farm businesses are an attractive proposition for investors into the future,” Mr Mahar said.

See the Capital requirements of Australia’s Agriculture, Fisheries and Forestry Sector report here.

/Public Release. This material comes from the originating organization/author(s)and may be of a point-in-time nature, edited for clarity, style and length. The views and opinions expressed are those of the author(s).View in full here.