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Transcript
The Future of Corporate
Agriculture
David Sackett
Growth Farms Australia
14th Sep 2012
Growth Farms Business
$320M under management
– 190,000 sheep
– 15,000 cattle
– 17,000 ha winter crop
– 10,500 ha summer crop
Cattle
Cropping
dryland
Cropping
Irrigation
Sheep
Farm Locations
Properties
Staff
Office
Acquisitions
• GF works with agents and clients to
– Develop strategy for Australian ag.
– Search for & evaluate opportunities
• Business plans
• Financials
– Negotiate acquisition of land, plant , stock, water
• Two factors drive investment performance:
– Purchase price
– Management
What is Corporate Agriculture?
• Run as an incorporated entity?
• What isn’t it?
– Everything other than small-medium scale family
farms
• Large scale family farms (>$10-20M invested?)
• Institutions eg super funds
• Foreign/city investors.
Track record of “Corporates”
•
•
•
•
•
•
Great Southern
AACo
Stanbroke
Prime Ag
Tandou
Consolidated Pastoral
1500
Individuals - Corporates
•
•
•
•
•
•
Medium to high net worth incl Family offices
Australian and overseas
$3-$30M, some >$50M investment
Long term view
Australia low risk (laws, economy, politics)
Usually need help with acquisitions and
management
Institutions – (super funds etc)
• Long term view (but act short term)
• Australian institutions have little interest
– Fragmented
– Unprofessional
– “Gloom and doom”
– Low operating yield
– Volatility
Is Big Better?
Operating Return (%)
2.5
2.0
1.5
1.0
0.5
0.0
Smallest 20%
300 hd
20 to 40%
1000 hd
40 to 60%
1900 hd
60 to 80%
3300 hd
Largest 20%
7500 hd
Source: ABARE
Is Big Better?
Pros and Cons
“Family Farm”
“Corporate”
Flexible
Patient capital
Nimble
Constrained by scale
Lifestyle and business
Skill level?
Often capital constrained
Governance?
“Outside” constraints
Specific targets (inflexible?)
Can be poorly responsive
Scale often not a constraint
Business approach
Access to expertise
Capital available
Governance?
Investment Options
Own land and Lease to Operator
Own land and Operate
Lower yield – 2-4%
Consistent return
Effect on land value/growth?
No direct exposure to prices
No working capital
Higher yield – 4-6%
More variable return
More complex
Provides price exposure
Need 20-30% working capital
Maximises capital growth
Australian v US Land
Values
Index 100=2006
180
US
160
140
120
Australia
100
2006
2007
2008
Year
2009
2010
Foreign Investment
“Any measure that puts further barriers in
place….. and reduces the flow of foreign
capital into Australian agriculture will
adversely affect the performance of the
agricultural sector. “
ABARES 2011
Foreign Investment In Agriculture
• 1% of entities
• 11% of land
• 9% water
• Largest in 09-10 was US, then Malaysia, then
UK
Foreign Investment In Agribusiness
• 50% milk processing
• 60% sugar refining
• 40% meat processing
• 50% of wheat exporters
Good or bad?
• Introduces capital
– AACo
– Vestey
• Introduces technology
– Chaffey Bro’s
– Us Cotton farmers
• Foreign investment
+15% GDP
Choice
• Open, dynamic, competitive helped by foreign
capital
OR
• Less productive, lower land values, less
dynamic?
A good agent (a buyers perspective!)
• Well informed
– High level
– Detail
• Straight
• Value v Price
• Responsive
In summary
• Agriculture will become more “corporate”
• Life style and off farm income will underpin
many small farms.
• There is much more foreign investment in
agribusiness than in agriculture
• Foreign capital helps underpin new
technology and improved productivity.