Australian ag needs to revamp itself to attract more investment – report

Business lobby group Agribusiness Australia found the sector’s governance needs to improve to attract more investment, among other changes required.

The Australian agriculture sector needs to do more to make itself attractive to investors if it is to achieve a target of A$100 billion ($71 billion; €61 million) in farmgate production by 2030, a new report has found.

Agribusiness Australia’s State of the Industry report, published this week, found the sector would fall around A$12 billion short of its target unless it revamps the way it operates by investing more efficiently, doubling down on environmental, social and governance, increasing its focus on agtech and diversifying market access for exporters.

Speaking to Agri Investor, Agribusiness Australia treasurer Mark Barber said: “Our growth underpins asset values across the sector, and if we want to attract more capital to grow the sector further we need to ensure that we achieve competitive rates of growth and profitability.”

The report identified three pillars that are important for businesses or assets to become more attractive investment targets: operational excellence, financial management and governance.

“The Australian agricultural sector succeeds in achieving the first two areas, however, there needs to be improved capability in the governances of the sector to entice greater capital investment. The importance of the role that governance will play in the success of capital flows into the sector over the next decade is paramount and requires a concerted sector effort to adhere to world-leading governance.

“In Agribusiness Australia’s view, there is considerable work needed in the governance of agribusiness to be in a position to attract capital investment,” it said.

Barber described this as an “opportunity” for the sector and said it would need large family farmers in need of investment to ensure they have the right business structures in place as well as a sector-wide focus.

“[This involves] providing greater transparency in terms of data and indices that are available to investors to benchmark their investment returns on. If Australia wants to be a leader in attracting capital, some consideration may be worth putting in to how we improve sector performance [in this area],” he said.

“The NCREIF index has been going for a long time in the US and has a good data set – it’s getting off the ground in Australia, but if the industry got behind that and turned it into a really useful tool for investors to benchmark performance on, that would be a great outcome.”

In addition, Barber said ESG had effectively led to the segmentation of the market, with certain investors having greater ESG requirements than others, and that this presented an opportunity for Australian agriculture and its business to differentiate themselves when competing for investment.

“Once you get market segmentation, it creates an opportunity for companies to create a competitive advantage by meeting the needs of certain segments. Perhaps ESG should be viewed in those terms – and for a developed country like Australia that has good inherent ESG qualities, it gives companies the opportunity to differentiate themselves and seek a higher price as a result.”

Agribusiness Australia launched the report this week as part of its CEO Summit, conducted this year as a webinar, and is producing a briefing paper following that event.