Farming’s rising attraction as an investment class makes a lot of financial sense for anybody committed to riding out the industry’s seasonal and market gyrations.
Real success, however, requires investors to commit to having their boots and skin “in the game”, not just money on the table, say experienced farm business operators who have built sizeable enterprises with other people’s money and practical help.
In particular, the art of growing family farming ventures into diverse scaled-up partnerships needs personal “emotional” connection between investors and their rural operation according to Tasmanian-based management consultant, Andrew Beattie.
Mr Beattie is part of a dairy investment management syndicate, BWB, involving local farmers and European investors.
Its activities include two expanding Tasmania dairy farms currently milking almost 2000 cows.
He is also a director of ProAdvice which facilitates collaborative partnerships between landholders in Tasmania and on the mainland, effectively merging ventures to improve their capacity and risk management.
What helps make our investment structure work well, is that direct emotional connection between investors and the business.
“The keys to a successful investment are getting the right people together, having the right property and putting the right systems in place to run the business well,” he said.
“You need managers with skin in the game – a financial link to the partnership.
“What helps make our investment structure work well, and differently to the corporates, is that direct emotional connection between investors and the business.
“To be productive and successful you need a direct philosophy towards agriculture, including understanding things don’t always go to plan in this game.”
While corporate groups, including overseas pension funds have been picking the eyes out of Australian rural property listings for the past five years as farmland’s capital returns hit double digits, Tasmanian farmers, Rob and Jo Bradley, have also achieved a respectable 19 per cent return on capital they invested in North West NSW cropping ventures with other family partners.
The Bradleys were initially part of one of Tasmania’s most successful family farming teams producing wool, lamb and dryland crops, then expanding into irrigated cropping and dairying.
Now their home partnership at Longford is with Mr Bradley’s father based on two farms over 1200 hectares – an 850-cow dairy, also part-owned with its manager, and a mixed cropping and sheep operation.
They, too are part of the BWB dairy management syndicate with Mr Beattie, and significant partners in 6700ha of cotton, cereal and chickpea production near Moree in NSW.
The risks have not been so great for us because we’re sharing with others who have boots on the ground, and we’ve diversified our own business
Mr Bradley is also a staunch believer in “grass roots, skin in the game” and short investor chains.
“It’s a long way between the farm and an office high rise, and a lot hard work to explain what’s going on if you don’t have boots on the ground,” he said.
His NSW partnerships, based on land leased from US-based Westchester investment management group, span two leased properties and another which is owned.
“We couldn’t have afforded to buy that land initially, but leasing gave us a chance to grow our business with help from partners who provided capital and expertise outside our comfort zone,” he said.
“It’s working extremely well.
“The risks have not been so great for us because we’re sharing with others who have boots on the ground, and we’ve diversified our own business.”
His key investment priorities start with good management, including knowing how to enhance the enterprise’s productive value.
Overall returns on investment for the Bradleys’ vary “from about 5pc to much better than that”.
Bradley Agriculture’s turnover is in the $8 million to $10m range, he told a recent Australian Farm Institute forum on investing in agriculture.
He placed great value in intellectual property – “having people on board who know what to do, know how to solve problems quickly, and understand of the history of the land and how its farming systems work”.
“Our corporate investment strategy, like most, is based on sound assets, but having on-ground management with skin in the game is most important in making it all work,” Mr Bradley said.
In Tasmania, his father initially considered buying one of their two holdings and leasing it back, but was convinced to take 25pc equity and have a direct say in how the two properties performed.
“Partnerships are really important to us,” Mr Bradley said.
“We work hard on developing good relationships and being committed to building and maintaining that working relationship between investor partners.”
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