What agriculture needs to do to stay ahead and meet investor and customer sustainability demands

Talking to customers and convincing investors about sustainability measures are some of the biggest challenges for agricultural businesses and it’s driving change across farms and companies

Sustainable farms, carbon neutral beef and free-range chicken cameras were all discussed at the first QBM and BDO luncheon of the year that considered whether changing investor requirements around sustainability mandates would alter farming practices.

NAPCo chief executive Richard Brimblecombe detailed the success of its Five Founders brand – a premium product billed as the first carbon-neutral beef in Australia with a commitment to issues such as minimising environmental impact and low-stress handling of cattle.

Brimblecombe says the decision to market its own brand direct to consumers was something the 143-year-old company “thought long and hard about” before deciding it was a way to ensure less volatility to investors and also meet growing demands by consumers.

“Last year we put a small number of cattle – about 3000 head – through that program,” he says. “This year we are budgeting to double that and we plan to double that next year. Demand has been so strong we have struggled to keep up. So the market has told us that it values our efforts in promoting a carbon neutral offering in this space.”

Experts who contributed to this month’s discussion, from left: Leith Boully, John O'Hara, Andrew Jones (seated), Bernadette Ditchfield, Margaux Beauchamp, Shaun McKinnon, Stewart Ebbott, Kim Morison (seated), Leisa Carniel, David Browne, Richard Brimblecombe (seated) and Richard Trivett. Photo: Mark Cranitch.

Brimblecombe says it also meant talking to investors about what sustainability actually looks like and then translating that into “meaningful outcomes on the ground, in a business, for a family running a cattle station” for example.

“When you drill down into it, it’s not that hard,” he says. “So it’s things like low-stress stock handling, using natural breeding processes to take the horn gene out of cattle so we don’t have to de-horn to address an animal welfare question.

“Leaders in agriculture have to get really clear about what it means on the ground. Stop trying to fight it, understand what it means and leverage it for everyone’s benefit.”

The move to diversify is also happening at Austrex where chairman Richard Trivett says the move to selling beef meat as well as continuing live export trade is proving successful. “It’s the sustainability of our business and it works in very well with our live export business,” he says.

On the Granite Belt, cattle breeder Palgrove is also looking at diversification from a stock seed business to having its own commercial herd.

Chairman Leith Boully sees opportunities with its investor being a NZ super fund that has strong values around social and environmental sustainability.

Leith Boully

“There is a lot of interest out there about getting a continuous supply of product that is branded and my sense is it is around people’s perception around ethics and performance in the business,” she says.

“People are looking to buy products from businesses who are not just seen to be doing the right thing, but actually are doing the right thing and that’s an opportunity and challenge for all of us in the future.

“If we want to access the capital we need to develop the agriculture that will see us into 2030 and 2050 we’ve got to produce an image that the investors can sell to shareholders who are millennials ... who will vote with their feet.”

BDO executive director of corporate finance Margaux Beauchamp says investors who are very protective of their reputations are demanding companies adopt sustainable practices.

Good Australian farmers have already adopted sustainable farming practices, says BDO’s Margaux Beauchamp. Photo: Robyn Beck

“However, it is not so much that they are changing farming practices,” she says. “Our good Australian farmers have already adopted sustainable farming practices. The difference is that good operators are able to attract external capital.”

Argyle Capital Partners managing director Kim Morison specifically targets superannuation fund investment in agriculture.

He says some of the biggest impediments for clients are around operational and reputational risk, as well as which commodity to invest in, because “it’s very cyclical and they don’t want to back the wrong industry, at the wrong time”.

Sunpork director Don Taylor, who also sits on the advisory board of meat processor Australian Country Choice, says another challenge is to tell the best stories to balance out the gloom of drought and flood news.

“Because it’s a fantastic story,” he says. “The technology being used in agriculture, the improvement that we see out there, the animal and plant breeding, the genetic modification of crops is world class yet we don’t sell a story.”

Sunny Queen Eggs managing director John O'Hara says the company has embraced talking to its customers. Photo: Lyndon Mechielsen

For Sunny Queen managing director John O’Hara, talking to customers has been vital to address animal welfare.

He notes it has about 280,000 Facebook followers, live chook cams across its operations and it used CSIRO to run market research about community perceptions. It also has initiatives such as fully solar farms, recycling all cartons and a policy not to build any more cage facilities.

“We’ve taken the decision we will talk very intimately with our customers,” he says. “We believe if we get that right everything else will fall into place, including investors being involved in the business.”