More investment needed to reach $100 billion farmgate output target

Sheep Central February 22, 2021

AUSTRALIA’S target of $100 billion in farmgate output by 2030 would not be met under existing investment levels, according to a new report released today.

The Capital requirements of Australia’s Agriculture, Fisheries and Forestry Sector report said 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.

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

And NSW Farmers president James Jackson said that as a key player in the national pursuit of $100 billion, the NSW farming sector will need certainty to thrive and to meet its own goal of $30 billion by 2030.

“We know there are a number of constraints on our ability to reach $30 billion by the end of the decade.

“One of the main ones is access to capital, both through bank lending and private equity investment”, Mr Jackson said.

NFF chief executive, Tony Mahar, said 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,” he said.

The report was prepared by Natural Capital Economics (NCEconomics) and it cites inadequate benchmarking data, lack of scale, risk and liquidity thresholds as key barriers to investment.

“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.

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.

He said 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.

“Australian agriculture is poised for continual growth. To supercharge this growth, agriculture needs to attract investment from sources other than debt and equity finance,” Mr Mahar said.

“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,” he said.

Mr Jackson said NSW agriculture has a reputation for producing high quality, safe food and fibre.

“This creates a wealth of opportunity both domestically and globally – we just need to translate that potential into reality.

“Our success on a global stage will be a key factor in our journey toward $30 billion,” he said.

“Farmers know there is an ongoing need to invest and innovate to expand to new international markets.”

He said the farming sector can be bolstered through both direct and indirect investment, but constraints on short-term finance, long-term strategies for expansion and supply chain improvements were challenging for farmers.

Mr Jackson said certainty for on-farm investment is required to expand commercialisation of research and development.

“We also need freight and logistic improvements to be an ongoing focus of governments.”

Click here to download or buy a copy of the AgriFutures Capital requirements of Australia’s Agriculture, Fisheries and Forestry Sector report.


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