It's not just home loans that banks and financiers are fighting over with interest rates at record lows.
A firm that funds herds of cattle and flocks of sheep has built up a $250 million business in Australia over the past two years as sharp-eyed farmers and graziers with an eye on high livestock prices and cash flow shift to nimble short-term funders.
ASX-listed pastoral company Elders' chief executive Mark Allison said the popularity and flexibility of financing offerings by StockCo, prompted Elders to acquire a 30 per cent stake in the company in a sector growing rapidly.
"We wanted to have a reasonable position without being dominant," Mr Allison said on Tuesday of the strategy behind Elders' purchase of its stake in StockCo, due to settle later this month.
StockCo funds the "finishing" phase for beef and lamb producers in feedlots and pastures and is now the largest specialist livestock financier in Australia and New Zealand. It was established in New Zealand in 1995 by founder Marcus Knight.
"Security is on the animal itself," Mr Allison said.
It's similar to a bank taking security over a residential property when agreeing to lend to a customer for a real estate purchase in Australia's booming residential real estate market.
Cattle prices have been at their strongest in 20 years, prompting warnings from some experts such as hedge fund Merricks Capital.
Mr Allison said customers found the flexibility of short-term livestock funding an increasingly important tool in helping with their cash flow.
"It's about the flexibility and the responsiveness," he said.
The spotlight is on Australia's rural sector, with Gina Rinehart's Hancock Prospecting and China's Shanghai CRED launching a bid on Sunday worth more than $365 million for the entire S.Kidman & Co business in an ongoing battle for the pastoral empire.
Mr Allison, who became chief executive of Elders in May 2014, said the StockCo stake purchase was in line with the overall Elders strategy of "capital lite" investments as the company continues with its turnaround.
"It fits in with our eight-point plan," he said.
Elders has slimmed down to a pure-play agricultural business after asset sales following a near collapse in 2008 caused by excessive debt levels under previous management and aggressive expansion into industries including automotive parts, forestry, aquaculture and telecommunications.
Under the slow and steady rebuild of Elders, Mr Allison put in place a turnaround plan built on a back-to-basics approach and the pursuit of sensible returns on investment in its core business.
Elders shares are back to a six-month high at just above $4. It undertook a 10-for-1 share consolidation in early 2015 to pull itself out of the ranks of the penny dreadfuls whose share prices fluctuate much more wildly with lower face values.
This story first appeared on The Australian Financial Review
