Prime Movers: Growth Farm founders Richard and Angus Taylor see positive future
HIGH rainfall farmland remains the “golden asset” in Australian agriculture, according to Richard and Angus Taylor.
HIGH rainfall farmland is the “golden asset” in Australian agriculture, according to Richard and Angus Taylor.
And the brothers, who grew up on a family farm in southeast NSW and pioneered a company that now manages about $400 million in agricultural assets on behalf of owner-investors, are well qualified to comment.
The Taylors helped established Growth Farms Australia in 1999, initially as a farm-leasing business. Richard continues as executive director and group manager, helping oversee 35 properties in Victoria, NSW and Queensland totalling 109,000ha.
The properties produce 47,000 bales of cotton, 58,000 tonnes of sugarcane, 25,000ha of winter crops, 157,000 sheep and 15,000 cattle.
Angus is a silent shareholder in the business, but does his bit to ensure agriculture remains near the top of the Federal Government’s agenda as the Liberal MP for Hume.
Speaking to The Weekly Times at a Growth Farm-managed property south of Goulburn in NSW, the man many commentators tout as Prime Minister material sees a bright outlook for agriculture.
And he reckons with the Australian dollar on a cheaper footing against its US equivalent, now is the time for the agriculture industry to seize the day. “We are suddenly far more competitive and we’ve got to make the most of it,” Angus said.
Older brother Richard is equally upbeat. Australia’s comparative advantage to the rest of the world, he says, is “the big broadacre stuff”.
“I do still think that high-rainfall farmland is the golden asset,” Richard said — meaning Australian agriculture is well primed to capitalise on what it does best.
DOWN THE LINE
RICHARD and Angus — and brothers Charlie and Duncan — come from a long line of innovators.
A grandfather, New Zealand-born civil engineer William Hudson, was commissioner of the Snowy Mountains Hydro-Electric Scheme — which opened up inland irrigation opportunities by harvesting water that otherwise would have flowed out to sea. He was knighted for his efforts in 1955.
Their father, Peter, had a high profile in agricultural politics during the 1980s, serving as NSW Farmers Association president and vice-president of the National Farmers’ Federation.
After completing his veterinary science degree at the University of Sydney, Richard did some consulting work before returning to the family’s farming operations at Nimmitabel, in the NSW Monaro region, in the early 1990s.
Angus, 48, studied economics and law at Sydney University before being awarded a Rhodes scholarship to Oxford University, where he completed a masters of philosophy in economics. He then embarked on a career in agriculture and resource consulting, initially with McKinsey and Co and later Port Jackson Partners.
GO FOR GROWTH
THE Taylor brothers initially saw Growth Farms as a chance for farming operations to grow faster by leasing more land. With “always limited opportunity” to lease country within a farmer’s own district, Angus said the idea was to “look into new areas, which is hard to do on your own. It’s easier to do as a group”.
“We’d taken on leases in the late 1990s and they were good. It worked,” Angus said. “Then in the early 2000s leasing became fashionable and the cost of it doubled market-wise. People were paying up to $12 or $15 per dry sheep equivalent, about what the top 20 per cent of farmers were actually making as a net profit.”
Growth Farms “almost became a management company by default”, Angus says. “That arm just took off”. It also advises on acquisitions, acting in the purchase of more than $200 million of Australian farmland in the past three years.
Richard said while it did “lease properties and conduct joint ventures”, 90 per cent of business was “a straight out management contract”. Growth Farms receives a fixed-rate fee “which just covers our costs” as well as a share of the farm’s profits, which means “we’ve got to make the place make money for it to work for us, as well as for the owner”.
Most farms are in NSW, with some in Queensland and Victoria. Richard said owners included retired farmers who no longer wanted to run the farm and didn’t have children coming home, some “Sydney, Melbourne money” and global corporates and investors.
UK-based businessman Sir Michael Hintze’s MH Premium Farms has 12 properties contracted to Growth Farms. Richard said half the farms belonged to people who own just one. Individual farms or businesses employ the staff who then report to Growth Farms.
FAMILY TIES
RICHARD and Duncan also look after the Taylor family’s farming interests across four blocks at Nimmitabel and one at Adelong, on the western side of the Great Dividing Range, which boasts a “more reliable winter-spring”. Angus and Charlie still have interests in the farm. Spanning about 12,140ha at more than 100,000 dry sheep equivalents, it runs two thirds sheep and a third beef cattle.
Since Richard returned to the farm 20 years ago, he has helped “double the land area and triple the stock numbers” of the operation with an increased focus on pastures.
“When I came back 70 or 80 per cent of our income came from wool. Now it’s about 40 per cent,” he said, adding that 35 per cent came from sheepmeat and 25 per cent from beef.
Richard said the country was mostly rocky basalt sitting on top of decomposing rock about 45cm below the surface. It receives about 700mm of rain a year and Richard said the season was the best he had experienced since he returned to the farm. “It’s phenomenal. We’ve had five above-average rainfall years in a row,” he said.
The country is 1000-1200 metres above sea level on the eastern side of the Monaro and subject to a more coastal, summer rainfall pattern and in a “real rain shadow” from westerly fronts during the colder months. At Adelong, better grass growth during winter means “spring really is spring, it’s not late winter”. Steers are weaned at Nimmitabel and moved to Adelong to be grown out.
SIGN OF THE TIMES
ANGUS acknowledged the changing nature of land ownership in Australia, with more farmers leasing land and the emergence of a greater number of owners “that don’t want to operate”.
This was in line with a trend globally, he said, citing examples in the US, Japan, Europe and the UK, and one that was “inevitably going to continue, particularly as a way of solving succession problems”.
“We are seeing more and more off-farm owners where there will be one family member left running it,” Angus said.
In Japan there were numerous examples of younger farm shareholders living in Tokyo “realising they haven’t got the scale as their parents move off. So they’re employing managers to collect together and aggregate smaller lots into commercial-sized places”.
“The (Japanese) Government is actually encouraging that now to get scale,” Angus said.
He rejected any suggestion this push for scale would spell the end for family farms, adding the trend was an “evolution rather than a revolution”. “(Family farms are) tending to get bigger with more diverse shareholding and different management structures. And much more professional. As you get outside interest, you’ve got to get your accounting, your reporting in order. It’s got to become better.”
RETURN SERVE
ANGUS, who also owns a small property near Goulburn where he lives with his wife, Louise, and family, said there was “more investment money than products” on the Australian farming landscape at present. But he warned the investor market was “very demanding” seeking “high returns and relatively low-risk opportunities”.
He acknowledged a lack of investment in Australian agriculture in recent decades, adding that while there was a shortage of equity “there’s been no shortage of debt”.
“When farms change hands, as inevitably they must — whether it’s part of the succession process or consolidation process — the only tool agriculture had was debt,” Angus said. “If that’s all you’ve got, you end up with too much of it. How you inject more equity into that succession and consolidation process is the real challenge we’ve got.”
Richard said Australian domestic superannuation fund managers were “the least interested” in domestic agriculture production “at this stage”.
“Ag has not done the corporate thing very well in the past and so there’s also history there. A lot of them have been burnt and even in recent times,” he said. “I don’t think listed entities are going to work really well regardless.
“You need to have a long-term view about it — 10 years is probably a minimum because if you’ve got a short-term view and you hit your first drought, which you’re inevitably going to do, investors will all get soured.”
SOW THE SEEDS
RICHARD said geographic and enterprise diversity was key to any successful major agricultural investment.
While he acknowledged irrigated horticulture nuts such as almonds were “the flavour of the month” among investors “five years ago they weren’t doing any good at all”.
While Australia has relatively well-valued land, higher labour and energy costs were prohibitive in some instances.
“If you at the enterprises we’ve run over the past five years, we’ve actually struggled with the irrigation enterprises a little bit because they are labour-intensive,” Richard said.
“They’re not as bad as horticulture but it is still the big broadacre stuff that is probably Australia’s comparative advantage when you look at the rest of the world.”
Angus said while cotton in the NSW Murrumbidgee Valley had “definitely been popular” with investors in recent years, meat and protein still offered “a fantastic opportunity” given demand from the emerging middle class in Asia.
He said while there was “no question” base carbohydrates such as wheat had been slow to enjoy the benefits “of the rapid growth we’re seeing in Asia ... inevitably it has to pass through”.
Richard said he was keen to concentrate on commodities where there was a strong export component, which “keeps the domestic guys honest too”.
“We sell most of the lambs to Coles and we have a good relationship with the supermarkets but the fact that 60 per cent of lamb is now exported — that sets the price and then the supermarkets pay a bit of a premium over that,” he said. “But we need a really important export sector to provide that competition.”
FOREIGN AFFAIR
ANGUS said there was no doubt Australian agriculture needed foreign investment.
A greater risk to farmers, he said, was in the form of “anti-competitive investment monopolising infrastructure and processing” whether it be domestic or foreign owned.
“Having competition at the farm gate for your product and avoiding a monopoly between you and the final customer is unbelievably important,” he said.
“That’s always something we’ve got to be alert to and ... we need to strengthen the capability of the ACCC to be able to deal with that, and farmers need to be better versed in how competition regulation and policy works.
“There’s good reasons to bring capital into Australia and bad reasons and there’s lots of good reasons. I think it is a far greater risk than having foreign investment per se.”
Wearing his political heart on his sleeve, Angus said the current Federal Government understood agriculture “more than governments have for a long time”.
He said deals for agriculture negotiated as part of recent free-trade agreements with key trading partners had been “phenomenal”.
“There is an understanding about these opportunities that wasn’t there even three or four years ago,” Angus said. “Is there still more to get? Of course there is. But are we a long way ahead of where we were a couple of years ago? Absolutely.”
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