At Sprout AG, we tender out between $600-800 million annually in agribusiness debt, positioning us as one of Australia’s largest independent advisors in the agribusiness finance sector. This extensive involvement provides us with unique insights into the agribusiness finance market, allowing us to identify key trends and help our clients make informed decisions.

Current Observations in the Agrifinance Marketplace

The Agrifinance market is dynamic, with several notable developments:

• One major bank has essentially stopped taking on new agricultural clients.
• Another major bank is undergoing its largest restructuring in history, resulting in clients receiving new points of contact.
• A regional bank with a long agribusiness history is being sold.
• Two new regional banks have become more competitive than ever.
• A large livestock finance funder is also being sold.
• Interest rates, driven by the RBA, have varied significantly between banks, leading to substantial cost differences for farming businesses.

Interest Rates and Client Costs

We advise our clients to anticipate potential rate increases for cash flow planning. While rate hikes are not certain, incorporating higher rates into budgets is a prudent risk management strategy. The general consensus is that interest rates will hover around current levels for the next twelve months, with minimal fluctuations either way.

There are two prevailing views on future rate movements:

1. Further increases may be necessary to align with global peers like England, Canada, and New Zealand.
2. Inflation control may suggest that the next rate change could be a decrease.

Regardless of these possibilities, businesses should prepare for slightly higher rates and adjust investments accordingly.

Service Levels and Digitalization

Despite overall industry growth, we observe a trend towards digital services and reduced face-to-face interactions. Agribusiness is unique, and understanding each financial statement’s story requires ag managers to engage directly on the farm.

Changing Suppliers and Client Placement

Our independent bank tender service involves preparing client information professionally and presenting it to the open market. This competitive process allows clients to choose their preferred bank or financier. We have noted a significant shift from major banks to regional players among our clients.

General Industry Trends

Our client base primarily consists of mixed farmers (sheep, cattle, wheat, barley, cotton). Cotton clients have reported satisfactory results, and dryland cropping programs have had a promising start this year. However, clients who purchased properties recently and focus on sheep enterprises are feeling the impact of higher interest rates and lower commodity prices for sheep and wool. These clients are restructuring to ensure their financing is fit for purpose, often converting to interest-only loans.

Three Tips for Procuring Your Ag Debt

1. Prepare Early: Start the process at least twelve months in advance.
2. Professional Preparation: Ensure your information is well-prepared and presented to make the best impression.
3. Thorough Process: Don’t just ask your existing provider for minor adjustments; engage in a comprehensive tender process.

For more information or assistance, please contact your local Sprout Agribusiness advisor.

Summary

We recommend tendering your banking business at least every three years. While this isn’t always about the best rates, it can have a significant financial impact, particularly for clients with over $2 million in debt.

At Sprout AG, we are committed to helping you navigate the complexities of agribusiness finance, ensuring you make the best decisions for your business’s future.

Leadership in Family Farming Businesses

Leadership always comes with its own set of consequences, especially within a family business. Balancing the natural instincts of being a parent with the demands of leading a successful enterprise requires a delicate touch. This is particularly true in family farming businesses, where the leader must navigate complex family relationships while ensuring the business thrives.

Navigating Dual Roles: Parent and Leader

In a family business, the challenge often lies in reconciling parenthood’s nurturing, coddling nature with the strategic, sometimes tough decision-making required in leadership. Good leadership in this context involves self-awareness about how you carry yourself, the mood you project, and the behaviours you reward.

The Growing Importance of Leadership

As family farming businesses grow larger and more financially complex, the importance of effective leadership becomes ever more critical. With up to four generations potentially involved, the ability to lead effectively can make or break the business. Leadership is about communication and making deliberate decisions that sometimes require putting aside natural family instincts for the greater good.

Beyond Execution: Working on the Business

Many business owners spend 99% of their time executing tasks and only 1% working on the business itself. However, the long-term sustainability of a farming business hinges not on external factors like weather or market prices but on the quality of leadership during the current generation. This leadership sets the tone for future success.

What Does Good Leadership Look Like?

Good leadership is a balance of hard and soft skills. It’s about fostering a positive culture within the family, excelling at family events, and ensuring robust documentation and processes are in place. This includes asset policies, employment policies, and clear operational guidelines. Professionalising the business is critical to leadership, and effective communication through various channels is essential.

The Impact of Your Leadership Shadow

Every leader casts a shadow that impacts the business and its culture. Your leadership style, communication methods, and ability to collaborate with family and team members significantly influence the business. Recognise that your generation’s leadership will have the most substantial impact on the business’s future.

Collaborative Leadership

Leadership doesn’t always mean leading from the front. It’s crucial to value the ideas and perspectives of family and team members. The next generation and younger team members often bring fresh views and different ways of processing information. Embracing these differences can strengthen the business.

Tips for Being a Good Leader in Your Family Farming Business

1. Acknowledge Your Leadership Role: Understand that your leadership has consequences and is vital for the business’s success.
2. Dedicate Time to Leadership: Balance execution with time spent working on the business. Most businesses need to focus more on strategic planning.
3. Establish a Communication Structure: Consistent communication is key. Use various platforms to keep everyone informed and engaged.
4. Be Mindful of Your Presence. Your attitude and behaviour are critical, and how you show up at work and with your family sets the tone.
5. Understand Your Leadership Impact: Recognise your leadership’s significant influence on the business’s future.

Leading a family farming business is a unique and challenging role. By balancing family instincts with strategic leadership, fostering a positive culture, and valuing collaborative efforts, you can ensure your business thrives for future generations.

With an ageing population and a decrease in young people entering the workforce, many businesses are faced with a shortage of quality employees. As the baby boomers begin to retire, the comparatively smaller workforce of young workers means it is more important than ever to plan ahead when considering employment, succession and business growth. 

Our purpose at SproutAg is to help our clients grow, and we do that by providing services that lay down the foundation for a successful future. In particular, SproutAg’s Ag Pro program assists clients in business growth and planned succession services to help farming businesses transition over time. 

When helping clients undertake successful succession planning, one key barrier is the inability to source people in their business due to the lack of talent in the area. This lack of skilled employees greatly inhibits business owners in their ability to tap into great people who can manage or work on farm. Advertising on a singular platform for job seekers, such as in the newspaper, contributes further to limiting this pool of potential candidates. 

Attracting people and talent into a farming business is often treated as an administration task with little to no strategic planning in the process. It is often the case that a single person in your farming business managing your farming operation can have a considerable impact on your overall profit and loss. Having competent and reliable people in your business allows owners to step away from the farm with confidence that it is being looked after, which is crucial to sustaining a viable long-term business.  

It can take at least twelve months of planning to be able to source the right people for your business. Obtaining good people for your business requires forethought, planning and time. It is not an overstatement to say it can be one of the most important decisions that you can make as a farm business owner. 

Having good people in your business 

• – Allows you to scale and increase profitability. 
• – Allows you to get away from the farm. 
• – Reduces risk in your business. 
• – Allows you as the business owner to concentrate on growing and strengthening other areas. 

Tips on sourcing people 

• – Plan ahead and allow a good amount of time – Start twelve months in advance (yes, twelve months).  
• – Involve people as part of your annual planning meeting. 
• – Get a professional to assist you in obtaining talent for your business. 
• – Start with a wide net of potential candidates. 
• – Take the time to get to know the best candidates before choosing someone.