A STRATEGY to remove barriers in Australia’s agribusiness sector and improve competitiveness has emerged through the Federal Government’s new white paper.

The Agricultural Competitiveness White Paper is positioned by Prime Minister Tony Abbott and Agriculture Minister Barnaby Joyce as an investment in Australia’s farmers and competitive strengths in agriculture.

In practical terms, the white paper has a list that aims to lower taxes on the sector, cut red and green tape, build infrastructure, encourage trade, develop northern Australia, and support business to innovate and create jobs, Mr Abbott said.

“A strong agriculture sector contributes to a strong economy – and that means more jobs, more exports, higher incomes and better services to the community,” he said. “We’re determined to make the sector even more competitive and to deliver practical actions that will keep our farmers and farming families profitable and resilient.” 

The white paper and the 2015 Budget combined offer significant tax changes for farmers.

Banks are now able to use farm management deposits (FMDs) as a business loan offset, reducing interest costs estimated at up to $150 million a year, from July 1, 2016. Also from that date, farmers can opt back into income tax averaging after 10 years, while farmers can also double their FMDs to $800,000.

The immediate tax deduction for fencing announced in the Federal Budget has already had a positive effect on the sector, as has the tax deduction for the cost of new water infrastructure. Farmers have also positively received the accelerated three-year depreciation of capital expenditure on fodder assets.

On the investment front, Mr Abbott said the government would will help farmers achieve a better return at the farm gate by investing $11.4 million to boost ACCC engagement with the agricultural sector including a new Commissioner expert in agriculture, plus $13.8 million in a two-year pilot program to provide knowledge and materials on cooperatives, collective bargaining and innovative business models.

“This will help farmers to establish alternative business models, including cooperatives, and manage contract negotiations,” Mr Joyce said.

INFRASTRUCTURE FOCUS

Mr Joyce said as part of the government’s commitment to reduce red tape from the economy by $1 billion each year, an additional $20.4 million has been made available to streamline agricultural and veterinary chemicals approvals.

“Improved country of origin labelling will also let consumers know where food is grown and processed,” Mr Joyce said.  There was also a big focus on infrastructure, especially water resources for agribusiness.

“The white paper builds on the government's investments to build 21st century water, transport and communications infrastructure, including a new National Water Infrastructure Fund,” Mr Joyce.

The government announced a $500 million National Water Infrastructure Fund, made up of $50 million to undertake the detailed planning necessary to inform future water infrastructure investment decisions and $450 million to construct national water infrastructure, in partnership with State and Territory governments and the private sector. He said $200 million of the fund will be dedicated to northern Australia projects.

As part of the infrastructure push, CSIRO’s TRAnsport Network Strategic Investment Tool (TRANSIT) would be expanded to ensure future decisions on transport infrastructure investment deliver maximum benefit, the Prime Minister said.

“The government is already delivering on its commitment to invest $50 billion for current and future infrastructure,” he said. “The $29.5 billion National Broadband Network (NBN) rollout will improve access to technology and give farmers more market options.

“The Government is investing an additional $60 million on top of the $100 million Mobile Black Spot Programme to improve mobile coverage across regional Australia.”

There was also $35 million allocated for local infrastructure projects to help communities suffering due to drought, along with other drought management strategies.

“Australia will always stand by farmers in drought,” Mr Abbott said.

Including initiatives announced in the 2015 Budget, the white paper provides long-term support for famers when they need it most, he said.

There were to be up to $250 million in Drought Concessional Loans each year for 11 years; $22.8 million to increase Farm Household Allowance case management for farmers; increased financial counselling services and improved access to community mental health; access for farmers to their FMDs when needed, without losing tax concessions; $25.8 million over four years to manage pest animals and weeds in drought-affected areas; and the Federal Government has offered farmers “advice and help” from the Australian Taxation Office.

SMARTER APPROACH

Mr Joyce said the white paper supports “a smarter approach to farming based around a strong research and development system that underpins future productivity growth”. He said there was also an effective natural resource policy in place “that achieves a cleaner environment as part of a stronger Australia”.

The white paper also provides the agriculture sector access to the most advanced technologies and practices by investing $100 million to extend the Rural R&D for Profit Programme to 2021–22 and $50 million to boost emergency pest and disease eradication capability. There is also $50 million for better tools and control methods against pest animals and weeds and $1.4 million to match industry levies and contributions in the export fodder and tea tree oil industries.

Mr Joyce said $1.2 million was set aside for the Rural Industries Research and Development Corporation. He also said the government was already helping farmers access skilled and reliable labour by focusing on better training through the $664 million Industry Skills Fund and making visa programs more flexible, such as expanding the Seasonal Worker Programme to all agricultural industries and removing the annual cap.

Mr Joyce said that while the Federal Government was opening new export markets, it would also protect Australia's highly prized biosecurity status, “which underpins our valuable exports”.

He said there would be $200 million to improve biosecurity surveillance and analysis nationally and $30.8 million to break down technical barriers to trade, along with the appointment of five new overseas agriculture counsellors.

An investment of $12.4 million was being made to modernise Australia’s food export traceability systems “to further enhance our food safety credentials,” Mr Joyce said.

www.agwhitepaper.agriculture.gov.au

ends

EXTRA >>

A NEW TOOL developed by the CSIRO is helping reduce the cost and time of transporting cattle in Australia – and this can account for up to 40 percent of the market price.

The new tool developed by CSIRO, the Transport Network Strategic Investment Tool (TRANSIT), identifies ways to reduce travel distance and time, saving fuel costs, cutting down on wear and tear and minimising stress for both truck drivers and cattle. 

Cattle face some of the longest journeys of any Australian commodity, according to the CSIRO. In northern Australia, cattle travel an average of close to 1000km, and as much as 2500km to reach east coast abattoirs.

“In developing this tool we completed the most comprehensive mapping of the cattle supply chain in Australia,” lead researcher Dr Andrew Higgins said.

“We can now use TRANSIT to identify key investments, large and small, at critical points in the supply chain, along with policy changes that might allow for better planning.”

As well as establishing the most direct transport routes, TRANSIT can identify the best opportunities for infrastructure and policy development, including increased access for higher productivity vehicles on some roads, and improved links to rail.

By providing a holistic view of the direct and indirect transport costs across the entire road network, TRANSIT has informed many infrastructure and policy opportunities under consideration by governments, industry and community in northern Australia.

For example, TRANSIT has modelled the potential benefits of sealing the remaining 105km of the Hann Highway north of Hughenden in central Queensland.

The tool shows that this would reduce travel time on the Highway from five hours to three and a half hours, saving about 1160 hours for the estimated 1300 road trains currently using the road per year.

TRANSIT also identified that the number of road trains using the fully sealed Hann Highway would increase by 25 percent, as it would become an optimal travel route, removing heavy vehicles from the congested coastal highways.

These benefits translate to a modelled cost saving of $1.23 million per year, plus the additional savings from shorter return journeys for empty trucks and benefits to other road users.

“Other advantages from a more efficient supply chain are improved safety and welfare of the live animals and the truck drivers themselves taking these long journeys, reduced emissions, and a more sustainable industry at a time of growth,” Dr Higgins said.

For northern Australia, the TRANSIT project takes in data on 12,000 properties, finishing farms, sale yards, feedlots, export yards, rest stops, abattoirs and ports; and 15,000 road segments (ranked according to highway, major road or minor road, sealed or unsealed, among many other factors).
The team also consulted with transport operators such as Liz Schmidt, a director of Schmidt Livestock Transport in Townsville and past president of the Australian Livestock and Rural Transporters Association.

“The TRANSIT team’s consultation with industry has been especially valuable for the ‘mum and dad’ trucking operations with limited resources," Ms Schmidt said.

Dr Higgins said that beyond cattle, TRANSIT would now be applied to other agricultural transport, particularly degradable produce.

It is already being applied to the cattle industry Australia-wide – mapping the path of about 60,000 origin-to-destination movements representing 20 million cattle transported in Australia per year.

“It gives us a truckie’s-eye view of a supply chain, factoring in thousands of small decisions in planning routes,” Dr Higgins said.

“The beef industry has faced difficult times lately, but now there is a focus on northern Australia and all the northern states are planning for expansion.

"Our hope is that this tool can make every long journey as short as it can be, and help to expand sustainable industry.”

www.csiro.au

ends

A BREAKTHROUGH live cattle export market agreement with China has been signed by the Australian Government, even as the traditional Indonesian market has been set back from 250,000 head of cattle to just 50,000.

Federal Agriculture Minister, Barnaby Joyce said on July 20 the Australian and Chinese veterinary authorities were in the process of formalising agreement on animal health certification requirements, which would allow industry to begin to prepare the commercial and Exporter Supply Chain Assurance System (ESCAS) arrangements for trade to commence. 

“I was very pleased today (July 20) to sign the agreement of health conditions for trade of Australian feeder and slaughter cattle to China—now it’s over to my counterpart, Minister Zhi Shuping, to sign on the dotted line and finalise the agreement between our two nations,” Mr Joyce said.

“Over the past five years we’ve had a significant trade in breeder cattle with China, primarily for dairy heifers. Now, I’m pleased to announce we are a step closer to the commencement in trade in live slaughter and feeder cattle to China.

“Getting the groundwork right for any new market can take time, and now the industry can prepare to begin this trade.

“This will be the seventh livestock slaughter cattle export market that I’ve opened since becoming Minister—adding to Lebanon, Bahrain, Egypt, Iran, Cambodia and Thailand.

“Market access is a major priority for the Australian Government—we have sent a clear message—Australia is open for business.

“And it’s not just our cattle producers who are experiencing greater market access opportunities, with the announcement earlier this year of agreed health protocols for breeder deer to Malaysia, and breeder sheep and goats to the Philippines,” Mr Joyce said.

“The Australian Government has worked hard to make sure our livestock producers and exporters have every opportunity to trade with other nations.

“Once the agreement is formalised, exporters will be able to begin working with importers in China to implement the Exporter Supply Chain Assurance System and establish supply chains that meet those requirements. 

“This industry is a real Australian success story. We are known world-wide for our high-quality and reliable livestock trade, and now industry has another opportunity for trade to increase,” Mr Joyce said.

www.agriculture.gov.au

ends

Food & Agribusiness Report with InterFinancial >>

PRICES are rising for food manufacturing and agribusiness companies in Australia, according to reports from M&A (mergers and acquisitions) specialists at InterFinancial.

InterFinancial’s research found multiples in the food and agribusiness sector increased up until the end of April, in contrast to a weaker overall market. At the end of April, the food and agribusiness sector traded on a forward price-to-earnings (PE) ratio of 17.3 times (17.3x), in line with the ASX200 on 17.0x, InterFinancial chairman Paul Keehan said, noting quite a lot of movement in the industry.

Leppington Pastoral Company, the Australian dairy group owned by the Perich family, has partnered with Moxey Farms to form a consortium named Australian Fresh Milk Holdings, with the objective of transforming Moxey into a major dairy farming business. China’s New Hope Dairy and Freedom Foods are also members in the consortium which is expected to invest more than $80 million. 

Ridley Corporation has signed a contract to sell a former feedmill site for $3m. The buyer will pay 10 percent (10%) of consideration by way of deposit and the balance upon completion.

Australian Dairy Farms Group has acquired three producing dairy farms in Victoria for approximately $16m. This acquisition is the first step for Australian Dairy Farms’ plans to raise $41m to fund the acquisition of six Australian dairy farms in Victoria for a total value of $39m.

There is a fair degree of early stage M&A activity and innovative growth moves throughout the sector, according to InterFinancial sources.

Blue Sky Alternative Investments is targeting the $1.9 trillion Australian superannuation industry with a new fund that will offer exposure to three agricultural asset classes: mid-tier agri-infrastructure, agribusiness private equity and water entitlements. Australia’s local pension industry has traditionally stayed away from agriculture investments but the company is confident the fund will attract commitments from other local funds.

Westchester Group, Laguna Bay Pastoral Company and Teachers Insurance and Annuity Association of America are believed to be among the potential suitors for Select Harvests’ almond orchards which are up for sale. The offshore agriculture investors are believed to be in the running, along with some local funds who are familiar with the sale-and-leaseback structure.

GrainCorp will invest $60m on 13 country site upgrades in 2015 as a part of the $200m to be spent over three years under Project Regeneration. Project Regeneration involves developing a network of over 50 high capacity country sites to support an efficient rail operation which will reduce rail costs by around $5 per tonne and return up to 1 million tonnes of grain to rail.

Tassal Group is believed to be advancing negotiations to acquire De Costi Seafoods.

Gunns’ receivers and managers are seeking expressions of interest to acquire 550 hectares of land suitable for industrial development and other uses located in Bell Bay, Northern Tasmania.

Private equity players including Pacific Equity Partners have essentially been ruled out as buyers for Costa Group, the Australian fruit and vegetable business due to the sellers’ price expectations. Costa’s owners, Paine & Partners and the Costa family, are believed to be seeking 10x to 12x earnings for the business. Limited interest from potential buyers could prompt Costa Group to pursue a $1bn IPO.

MPDT Tree Service, a private family-owned Australian tree lopping and vegetation management company, will consider a sale that could facilitate the next phase of the company growth, said Billy Quaid. The owners are also planning to focus on alternative businesses in the future, in particular in the agricultural space.

The Chia Co, a private equity-backed Australian grower and distributor of Chia seed products, is looking to enter China and is seeking approaches to establish joint ventures locally, managing director John Foss said.

Macquarie’s Pastoral Fund, one of Australia’s largest landowners, could bid for S. Kidman & Co, the Australian landowner. A private fundraising by the Pastoral Fund has led to expectations that it could bid for S. Kidman.

Byron Bay Chilli Company, a privately held Australian producer of jalapeño-based condiments and snacks, is actively seeking a partnership in North America while identifying other global expansion opportunities, co-owner Murray Richardson said. A strategic investor would be considered if it owned a manufacturing plant that would offer the benefit of lowered cost of production.

Greenland Group, a Chinese state-owned property developer, is in talks to acquire food manufacturers in Australia and New Zealand which it could then inject into its newly-launched supermarket business, known as G-Super.

Odin Energy has executed a MoU to acquire The Hemp Corporation, via a SPV. The Hemp Corporation controls the supply and procurement process of hemp from seed propagation, planting, harvesting, processing and distribution.

Avon Valley Beef, a family-owned and operated beef wholesale and retail business, is looking for a buyer and could sell the business in 2015, founder Peter Hepple said. The owner prefers to sell the business to local buyers as he is determined to keep it Australia-owned.

Consolidated Pastoral, the Australian beef producer, is said to have sent sale documents to potential buyers in a stake sale process. Owners Terra Firma is believed to be seeking a partner to provide an investment of $300m-$500m.

Archer Capital’s exit from Brownes Dairy is likely to be delayed as the Western Australia-based company’s new management builds a track record.

Vita Coco, a privately-held New York-based coconut water company, is opportunistic about acquisitions, chief executive and co-founder Michael Kirban said recently.

The M&A specialists in food and agribusiness at InterFinancial, chairman Paul Keehan, directors David Hassum and  Brett Plant and associate director Mark Steinhardt compile market intelligence from their own private sources along with the Australian Securities Exchange (ASX), mergermarket.com and various other public information sources. Forecasts are consensus forecasts sourced from S&P Capital IQ.

www.interfinancial.com.au

ends