Family farms a strong business model
1 March 2016
Large family farms have generated, on average, higher returns than their corporate counterparts. Family farms have also provided most of the capital that underpins the Australian farm sector.
ABARES Executive Director Karen Schneider presented the analysis in the opening address at the ABARES Outlook 2016 conference in Canberra today, where investment in agriculture is being examined by leading national and international experts.
“We know improving productivity will be critical to the success of Australian agriculture on world markets. That’s going to require investment across the board—in land, in technology and in our people,” Ms Schneider said.
“And every year, more than $2 billion is added to the productive assets of the Australian farm sector.
“Around 60 to 70 per cent of investment is provided directly by the owners of family farms, while investment by the corporate sector is less than 20 per cent when all factors are accounted for.
Ms Schneider said that one reason for the disparity in investment levels between family and corporate farms might be the difference in investment returns.
“If you’re looking at broadacre and dairy, except in the case of beef, family farm structures have outperformed the corporate sector in terms of operating returns, especially in cropping,” Ms Schneider said.
Ms Schneider said corporate investment had a great deal to offer the farm sector.
“The corporate sector can provide new operating models – for example the greater reliance on hired labour and leased land can provide easier access to farming for a younger generation,” Ms Schneider said.
“Aggregation of farm land by corporates could also provide an exit strategy for older farmers or help in succession planning.
“And there’s often a focus on skills development to take advantage of technology on farms and to build better business practices.”
However Ms Schneider said corporate investment wouldn’t challenge family farms in the near future.
“The differences between family farms and corporates are also seen in Canada and the US, so it’s not just an Australian story,” Ms Schneider said.
“It’s been this way for a long time – and it’s one of the main reasons that family farms continue to dominate agricultural industries around the world.
“And it’s the reason that we don’t expect to see corporate agriculture transform the family farm model in Australia any time soon.”
ABARES Outlook 2016 is being held in Canberra on Tuesday 1 and Wednesday 2 March. Australia’s leading forum for public and private decision-makers in agriculture—Outlook marks its 46th annual conference this year with expert analysis of the business of agriculture.