Vertical integration with joint-venture finance: an alternative business model for the sheep industry

Page last updated: Thursday, 16 November 2017 - 12:24pm

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How can the WA sheep industry fund expansion?

Industry expansion is currently limited by capital availability. A source of capital worth considering is joint-venture financing coupled with off-take agreements.

There is rapidly escalating interest from institutional and large ultra-high net worth investors in Australian agriculture. The hurdles to the successful linkage of producer and financial investor are substantial, including:

  • mismatch of investment time frame requirements
  • lack of investor readiness
  • lack of understanding and mentality between two radically different sectors: finance and farming
  • reporting and governance issues
  • opposing requirements in terms of risk and control issues
  • blockages in the supply chain.

At a time of unlimited opportunity and rising demand at the institutional levels, for the producer the current conditions are inhibiting not only investment options but also their willingness to embrace expansion and, in some cases, willingness to remain in sheep production at all.  

The challenge for the sector is to create small to mid-level investment structures that broaden the depth and width of acceptable investment so that investment can flow through to the smaller agricultural operations, allowing an accelerated take up of the many unfunded opportunities in Australian agriculture.

Australian agricultural businesses are establishing joint ventures with end users injecting capital to expand operations. For example Bindaree Beef Group and Australian Fresh Milk Holdings are agricultural businesses accessing joint-venture financing to fund expansion. Sundrop Farms attracted investor funding for sustainable truss tomato production for a 10-year off-take agreement with Coles.

Contact information

Tamara Alexander