Capital conundrum in Australian Agriculture

In the wake of the Federal Government announcement yesterday, proposing to introduce a new $55 million screening threshold for foreign investment in Australian agribusiness in addition to the new $15m threshold for foreign investment in agricultural land, primary producers and agribusiness enterprises may be forced to go cap in hand when it comes to seeking investment for growth initiatives.

Australian farming conjures up images of generations proud to be working the land. It’s easy to see why the heart of Aussie farming being bought out by overseas buyers sends alarm bells ringing. But before we hit the panic button; have we reached levels of foreign ownership that would cause concern and what options will this leave our farmers searching for capital?

“Quite simply, appetite from Australian institutional investment remains culturally resistant to large scale agricultural investment. International institutional investment has historically held a greater appetite for longer term agricultural investment.

“As Australia faces exponential growth opportunities from Asia, the need for foreign capital to drive investment and productivity will be important.

“Current levels of overseas investment may not be as alarmingly high as many would believe. While the governments proposed agricultural land register of foreign ownership will provide important data in terms of understanding the true position, Grant Thornton’s recent Food & Beverage Deal Tracker, Bite Size. indicates overseas buyers of food and beverage, including agribusinesses enterprises make up a very small portion of the corporate deal activity across the entire sector.

“Results show 80 percent of Australian businesses sold during the period January 2011 to June 2014 were to domestic acquirers. That leaves overseas buyers accounting for only 20 percent of total deals over the same period, said Shaun McKinnon, Partner, Grant Thornton Australia.

Are we saving our land or pruning agricultural growth?
“Grant Thornton’s Hunger for Growth survey found more than half (53 percent) of Australian food and beverage executives indicated their organisation would need additional funding over the next year at the time of the survey. We also found that 16 percent told us sourcing capital was a constraint on their ability to grow their business.

“Given the historical reluctance of local institutional investment in agriculture and the feedback from food and beverage executives that they intend on seeking additional funding in the near future to support growth, have we sold ourselves short if we make Australia a less attractive option for foreign investment in agriculture?

“Perhaps this is an initiative best considered further down the track if total levels of ownership increase to alarming levels. Foreign investment and growth in the sector will most likely only assist to drive growth which could ultimately encourage an increased appetite for local institutional investment further down the track,” said Mr McKinnon.

Helina Lilley - National Public Relations Manager T +61 2 8297 2421 M  0437 725 520 E helina.lilley@au.gt.com