Growing future for family farms
THE IMPORTANCE OF THE FAMILY FARM ... TO SUPPLY FOOD AND PROTEIN INTO BURGEONING ASIAN MARKETS SHOULD NOT BE UNDERESTIMATED.
JEFF SCHRALE HERE in the Far North, family farms make up the majority of the agriculture sector.
In fact, only 2 per cent of local farming operations function under a true corporate structure with boards and shareholders.
The importance of the family farm, ensuring Australia and our region realises the opportunity and increases productivity to supply food and protein into burgeoning Asian markets, should not be underestimated.
While many family farms continue to grow and create scale, there’s a place for joint marketing arrangements to create scale in a similar way to what traditional cooperatives did in the past.
The next structure is likely to take a more corporate form to allow farmers to invest in marketing their produce post the farm gate while still controlling and operating their farming business.
Of course, there are challenges – market access, prices, stable supply to meet large offshore orders, development of a brand that features on shelves year-round – but when we look at our local horticultural industry on the Atherton Tablelands, it’s hard to go past its potential.
We have world-class produce and access to an international airport.
We are in easy reach of the lucrative and growing Asian markets and our produce can attract premiums at a level that justifies the cost of airfreight.
While there is a reliance on the domestic market for returns, there will always be large fluctuations in the price of horticultural goods.
The economics of supply and demand influencing price is still relevant today.
For this to change export markets need to be opened that pay as much, if not more, than the domestic market.
New direct flights announced with China Southern creates a new opportunity that can’t be ignored.
Scale continues to be important with long-term supply agreements going to producers with the ability to provide it.
Larger family operations have emerged alongside corporate farming operations, as economies of scale impact financial returns, while innovative smaller operations continue to create returns that surprise – finding a niche or building a brand that buyers recognise and want to sell.
Attracting investment to drive scalability will be key for family operations of all sizes.
For those looking to take up the opportunity, they will need clear and robust systems, processes and financial controls.
Investors are looking to grow returns and multiples of earnings and production records will become increasingly important.
Investors look for scale and often avoid having to buy multiple properties to then consolidate them.
If they are able to invest in a company that controls significant supply, and one which has a globally recognised brand, they would be more likely to invest.
Attracting this form of investment doesn’t stop family farms continuing their own operations and it allows them to invest in another part of the value chain – whether it be picking, packing, transporting or marketing – while maintaining a degree of control.
For Cairns this provides greater economic diversification and stops value chain leakage through to southern agents and markets.
It creates employment, new opportunities and the potential to increase direct flights through freight, making it more viable to come to our destination.
Building our local capabilities across the supply chain and attracting investment also has the potential to improve farmer returns, freeing capital for expansion and investment back in our local community.
And, finally, it attracts external interest and capital that is so important for the future of our region. Jeff Schrale is the ANZ Bank’s regional executive for Far North Queensland