01 Oct The Future of the Agricultural Industry
$800,000,000,000 is a big number. That is what Australian Agribusiness requires over the medium term to sustain and grow the industry. 10 farmers per day have left the industry over the past 30 years. With the average age of today’s farmers being in their late 50’s, the next 10 years is going to witness a full generation transition of farm ownership. What will this industry landscape look like in 10 years and who is going to fund the succession of ownership?
Re-liquifying the Agricultural Industry
The current debt within Australian Agribusiness industry is $64,000,000,000. But it has been noted by reputable agribusiness researches that Australian agribusiness requires $800,000,000,000 to successfully fund the industry into the next generation of growth and capture global market opportunities. The question has been thrown, how is this going to be funded and what is the landscape of the next generation of agribusiness going to look like?
It has been cited that 10 farms every day have left the industry over the past 30 years. With the average age of farmers in their late 50’s, this demographic trend is going to continue. New capital is required to be invested into the industry to successfully complete this succession planning event, but where will it be sourced and what structural changes are going to take place in lieu of this event?
The debate around foreign investment and corporate agribusiness has long been a heated and emotional debate. There are certainly strong arguments on both sides of the equation to ensure there is ample fuel for these discussions to continue with such intent and energy. Farmers are our natural guardians of our soil. How does this social responsibility fit into the economics of corporates and foreign investment? Let it be cited that all industries need to reinvest and innovate or otherwise they will consolidate and dissipate and consolidation will put Australian food security at risk.
Australian domestic banks are currently comfortable providing debt capital to less than 10% of the medium term capital requirements. There is a space and a strong argument to support corporate activity and foreign investment to fulfil the capital gap. It just has to be managed under a solid corporate governance framework.
Run the numbers and predict the future. Domestic and global economic forces will continue to consolidate the farming unit into more cost efficient production systems. Supply chain infrastructure is in sure need of investment to capture competitive advantage whilst our global trading partners naturally create the demand to drive the capital towards our enviable industry.
Let’s review again in 10 years’ time. But in the meantime, please enjoy Ian Robinson (Robinson Sewell Partners) interviewing Ian Joseph, director of Empirical Capital discussing such a topic.