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Farms need investment to hold market share

AAP logoAAP 21/11/2016 Trevor Chappell

Australian agriculture needs a lot more money if it is going to make the most of strong overseas demand for Australian produce, a new research paper warns.

The ANZ Bank report, Australian Agriculture: Funding Our Future, says the nation's agriculture sector needs $109 billion in capital - a 21 per cent increase on top of current levels - for on-farm and supply chain improvements just for the industry to maintain its current share of global exports by 2025.

Trade agreements that Australia has ratified in recent years are expected to be operating with full effect by 2025, allowing countries that want Australian produce to buy more under reduced tariffs.

The ANZ report says Australian agriculture will need extra capital to meet that increased demand.

If the agriculture sector fails to attract sufficient capital, investment in infrastructure, technology and innovation will be lower and productivity will fall, while opportunities to make processing and distribution more efficient could also be lost.

But a lift in production could generate an extra $700 billion to $1.7 trillion in agricultural exports over the next 40 years, the report says.

"There's little doubt Australian agriculture requires more capital to ensure it can reach its market potential," said ANZ Head of Agribusiness, Mark Bennett.

Farmers and producers also need new and more efficient sources of funds.

The report found that ownership structures and funding of the agriculture sector had not changed much since the 1900s, and new types and sources of funding need to evolve.

New sources of funding could include institutional investors, pension funds and foreign investors rather than the borrowing from banks that most farming families rely on now.

Mr Bennett said farmers also needed to ask themselves if they needed to have complete ownership of their operations to succeed, or whether they should consider options such as bringing on partners or investors.

The report said that demand for Australian agricultural produce is expected to increase by 77 per cent by 2050 - an annual increase of 1.3 per cent.

Production increases of that size can only be met if producers reinvest in their operations.

But most Australian farmers have little or no access to institutional investment and external sources of equity.

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