Who will take over the farm?

04 Jan, 2013 03:00 AM

AFTER emerging from a decade of drought, many of Australia's ageing baby boomer farmers have worked out their Generation X and Y offspring aren't so keen to take over the family enterprise.

Although overall prospects for Australian agribusiness haven't looked brighter for years, muted interest from younger age groups is leaving many older farm owners with little option than to sell to outside investors or big corporate-like family ventures.

On many farms where new spending is badly needed and cashflow is still only just recovering from past seasonal setbacks, 2012 was the year families were forced to confront farm transfer realities.

By the mid 2020s much of Australia's productive farmland could be in the hands of corporate farming operations according to international business advisory firm KPMG.

Early this year a "wake-up call" report from KPMG's agriculture's changing composition was accompanied by predictions from demographic analyst Bernard Salt suggesting the departing baby boomers "may spell the end of the family farm model".

Farmers born between 1945 and 1960 (baby boomers) were struggling to pass on their businesses to the younger generation "because Generation Y (1975 to 2000), in particular, doesn't want to take on the responsibility - or liability as they see it", he said.

"This age group tends to have broader horizons. It generally doesn't see the benefit of farming's long hours and unpredictable seasons and markets."

Ironically, KPMG noted agriculture's supply chain was looking towards an "unusually favourable outlook".

Despite the inevitable uncertainties of weather, the threat of global warming, cost pressures and fluctuating commodity and financial markets, KPMG tipped demand for Australia's main farm commodities would be bullish for several decades.

It even forecast a solid lift in productivity and earnings opportunities in the politically hen-pecked Murray-Darling irrigation sector as investment in water efficient infrastructure cut wastage and reversed the eastern States food bowl's productivity slide.

Similar findings by ANZ Banking Group tipped Australia and New Zealand could more than double the real value of their agricultural exports by 2050 as food demand to lifted by 60pc in response to rising incomes and changing diets in developing countries.

But ANZ's Insight study also forecast that $1 trillion in new capital was needed in the next 40 years to drive production growth and support farm turnover in Australia.

Its report emphasised that becoming a food bowl for Asia would not happen of its own accord, noting that recently Australian agriculture had achieved lower productivity growth and lower profitability.

ANZ urged selectively reinvigorating high potential industries such as grain and the high growth dairy industry in NZ by strengthening farm extension services to lift yields and attract investment.

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4/01/2013 5:59:25 AM

Land is prohibitively expensive for new farmers trying to join the industry.
4/01/2013 7:02:16 AM

"Although overall prospects for Australian agribusiness haven't looked brighter for years". They could not have got much worse in the last 15 years! You don't need the likes of KPMG to work out why the younger generation aren't that interested in taking on the farm as there's not enough profit in the business - you can't eat capital gain! And yes, getting bigger (corporatism?) is definitely not the answer. That's been tried previously & strangely it coincides every time there is an increase in ag commodity prices. The grass always grows greenest over the sewerage pit!
4/01/2013 7:02:42 AM

It is not that land is prohitively expensive so much as terms of trade have been declining for 40 years. If this generation has even half the terms of trade leverage of the baby boomers, the banks and this generation would be queued a mile long buying the farm and wanting a career in farming.
4/01/2013 7:08:41 AM

Here's where we need to look at the NZ model of equity partnerships to buy farms. Banks also need to change their financing models to allow for businesses to be operationally based...i.e livestock used as collateral instead of the standard 'what if they die, what if they are sold blah blah blah'. A lot of farmers my age are looking at the industry saying yes this is a great investment but, no, the current financing set ups are putting a stranglehold on real business growth that doesnt always need to be tied to land ownership. Lets modernise this industry or all end up peasant workers!
4/01/2013 8:02:02 AM

How can young families with the cost of raising children and often boarding school fees possibly afford to take over the farm, which at best has only marginal profits and relies so heavily on the uncertainty of commodity prices? The prospect of a life of debt and having to work way past average retirement age isn't that attractive!
4/01/2013 8:28:55 AM

It does not matter if land is family or corporate owned, the real issue in Aus is ag profitability. Look at recent corporate Ag performance - they are not immune from failure.
4/01/2013 9:47:48 AM

The reason is it is impossible to make a profit. We are still paid the same amount for our cattle as we were 30 years ago. In 1980 we could buy a trayback Landcruiser for 12 bullocks, now we need 60 bullocks. We have run out of innovational ideas, we are the most efficient farmers in the world just to make a living. There is a difference between a living and a profit. I certainly would not go into food production in Australia. We would like to sell out but there are no buyers. Nothing will change until we get rid of the market control of the big supermarkets and Australians get hungry.
Gil Hardwick
4/01/2013 10:54:53 AM

The real wonder is that the 'family farm' model has lasted this long. Common sense would have seen it superseded by the late 1970s by large corporate business model positioned to invest and absorb costs through the inevitable bad years. It's not as if the idea is something new. Australian agriculture has been done this way from the early days. It's the restrictive, ideological nature of the nuclear family on their own farm that's been the issue, the problem from year dot being too many kids, not which one will inherit. There will always be farming. Way past time to move on finally.
4/01/2013 11:37:48 AM

Farm prices and returns (through extra taxes and inflated costs) have been reduced by governments for years to keep inflation in check but now the chickens are coming home to roost. After years of low prices and ever increasing costs then a 10-year drought where many farmers were unable to gain any assistance the generation growing up through that despicable situation can be excused for thinking the grass appears much greener off the farm. Any government must decide whether we want the family farm model to continue in Australia then if so make a concerted effort to make sure it happens.
piece maker
4/01/2013 3:24:07 PM

Family farmers are competing for finite land and payment for whatever they can produce in a world market place. There is no value in just whinging about overseas or corporate investors or how unfair it all is. Front your local politicians and farmer bodies to do their job representing the interests of Australia and its farmers. If your representatives are unwilling or incapable then maybe it’s time replacements were discovered.
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Good observation Itz Me. As big as it is this fleece will pale into insignificance if the Paris
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