More Australian farmers and graziers are adopting innovative corporate business models to secure long-term sustainability and growth, according to a leading agribusiness advisor.
BDO partner David Krause said primary producers were starting to think “non-traditionally” when it came to planning for long-term success.
“More family-run businesses within the agricultural sector are beginning to apply strategic corporate models to remain sustainable and profitable long-term,” Mr Krause said.
“This non-traditional way of doing business is a direct result of an industry coming to terms with ageing farmers, property prices and the ability to fund further development of their existing properties, driving the need for different business models in order to stay competitive well into the future,” he said.
Business owners were beginning to think innovatively about using existing capital to get the most out of their agricultural operations.
“Increasingly, companies are looking to innovative ways to redistribute their existing capital in order to expand their agricultural operations,” Mr Krause said.
“We've seen a number of opportunities in the market where family-owned agricultural businesses are entering into sale and leaseback arrangements of land and water assets to fund production assets such as cattle."
“This is an example of using the sale of an asset, the property, to fund the growth of the core operations and income-producing assets, such as cattle, while still maintaining control of the property assets.
“The innovative operators understand the differences in the assets classes and how extracting the value of one asset class can be used to maximise returns for their enterprise as a whole.
“Another option is for multiple farms to consolidate their land, attracting much bigger investors from both here in Australia and overseas,” he said.
BDO executive director and international business specialist Cameron MacMillan said while corporatisation was beginning to gain momentum, there were still reservations within the industry about “selling off” a business that had been family-owned for generations.
“There are a lot of misconceptions surrounding the notion of foreign investment,” Mr MacMillan said.
“It’s not about selling off pieces of the family business – it’s about managing assets in an innovative way so their value can then be injected back into the day-to-day operations of the business.”
Mr MacMillan said the future of agricultural industry depended on business owners looking to alternative models to secure a sustainable future.
“Foreign investment will almost certainly play a role in securing the future of the agricultural sector,” Mr MacMillan said.
“Smart decisions made today will be crucial in sustaining the strength of the industry for generations to come.”