Australian farms need to be "investment ready" to attract the necessary capital to take advantage of the growing global food demand.
Dairy Australia director John McKillop said the federal government's tightening of foreign investment rules was at odds with its calls for more investment from outside of the agricultural industry.
"Whilst we have a government that is crying out for further investment in agriculture to fulfil this vision, we have one that is about to introduce legislation that will effectively impose a zero threshold for foreign investment," Mr McKillop said at the inaugural AgriVictoria forum in Melbourne.
"Reducing the threshold from $253 million to $15m is not in itself the only issue but that it's now cumulative so effectively any foreign investor once they reach $15m will now need to go to FIRB and pay a fee up to $100,000.
He said an extension to the approval process would further deter the foreign investment needed for Australian agriculture to grow.
"There's been a double standard between farming and processing and other industries such as mining."
Dairy Australia farm business management program manager Neil Lane said to attract foreign or domestic investment, farmers needed to improve record keeping, business planning and growth - and such discipline was necessary and beneficial regardless of plans to raise capital.
Mr Lane said investment could help operation's boost productivity, gain a competitive edge and grow.
"From a farmers' perspective the investor requirements in terms of reporting and articulating what's going on is probably the biggest change and challenge, such as an operational budget and cash flow," Mr Lane said.
"It is not the time to seek outside investment when your costs are eating up profits and you are having troubles with the bank."
He said the investment process didn't happen overnight, it was a six to 18 month process "at least".
As such, farmers who wanted to sell their business or part of it in the next 5-10 years should start keeping better records, reporting and planning now.
He said farms were trending to grow in size and that has implications for people's exit strategy because it would likely be funds and corporations that could afford to buy a farm that was worth $5m, $10m or $15m.
His three steps to get investment ready are:
Step 1: Pitch your investment opportunity with an "Information Memorandum"
Step 2: Agree on the rules of engagement
Step 3: Negotiate an agreement
Essentially, the first step is to outline the case for investment, including an overview of industry and a business case.
"You as the operator have to prove you know the business inside out, and many of these are intuitive but you need to document them," he said.
This could involve skills beyond the traditional farmers' role, so Mr Lane suggested getting an easy-to-use accounting package or seek training.
"You have to understand and be able to explain how investment fits into your business strategy for growth and profitability."
Then both parties need to work through due diligence.
"This is where you get to ask the difficult questions of each other. If you can't get through this process then you probably should step away," Mr Lane said.
"It comes down to are the people right? And is the proposition right?"
Farmers have to be willing to disclose past performance, current position (balance sheet), performance forecast and sensitivities to market, climate and other factors.
He suggested considering investment partnerships "as a marriage of capital and expertise".
He said farmers needed to agree on the rules of engagement, including who would do repairs and maintenance, detail of expectations (including on reporting) and how involved the investor would be in running the farm.
"In the dairy industry, we think only about 15pc of farmers do monthly cash flow budget, and of those most do them on the request of their bank.
"But an investor will want to know are they on track, if not operator needs to be able to explain those variations and for some people that can be quite onerous.
The negotiations should also cover expectations of working culture, including the treatment of workers, suppliers, clients and service providers.
