Murray Darling Basin Regional Economic Diversification Program: a review of equity capital investment in the development of high value horticulture

Project report


Cotter, Julie, Rochecouste, John and Mohsin, Mohd. 2016. Murray Darling Basin Regional Economic Diversification Program: a review of equity capital investment in the development of high value horticulture .
Title

Murray Darling Basin Regional Economic Diversification Program: a review of equity capital investment in the development of high value horticulture

Report TypeProject report
AuthorsCotter, Julie (Author), Rochecouste, John (Author) and Mohsin, Mohd (Author)
Institution of OriginUniversity of Southern Queensland and Queensland Department of Agriculture
Number of Pages75
Year2016
Abstract

This report is part of the Murray Darling Basin Regional Economic Diversification Program - Queensland. The Agricultural Value Chains and Food Systems group at the University of Southern Queensland was commissioned by Queensland Department of Agriculture and Fisheries to review capital investment for the development of high value horticulture in the Queensland Murray Darling Basin (QMDB).

The research has three objectives:
- To better understand the capital needs of Queensland Murray Darling horticultural producers in supporting their expansion, diversification or infrastructure development plans;
- To provide information relevant to QMDB producers on partnering with investors; and
- To overview investment opportunities for the QMDB region and how economic diversification of the region might be progressed through investment of capital from outside of the region.

The methodology used for this report involves a qualitative ‘multi-stakeholder analysis’ using in-depth interviews with stakeholders across the horticulture investment chain.

First, we interviewed producers in the Murray-Darling region involved in establishing new ventures for their views on capital raising. The producers were established horticultural producers or other crop growers (e.g. cotton) looking to diversify into horticulture or new horticultural crops. The region’s main attribute is a secure water supply and dry sub-tropical climate. Suitable infrastructure for cold storage, packing and/or processing of horticulture produce is limited.

These interviews indicated that the region’s producers are interested in capital raising beyond bank loans, but they had little to no understanding of the process and the requirements involved. Most had made a start at a new venture but were still some time away from production supply to a market.

Second, we interviewed agricultural investment professionals as well as producers from other regions that have had positive and negative experiences in equity capital raising. Our results indicate that there are substantial differences in the perspectives of producers and investors. Cultural change is needed for producers and investors to work together. Agricultural investment professionals have an important role to play in educating both parties about the other and bringing them together.

Potential investors and their motivations are diverse. They include institutional investors such as superannuation funds and private equity funds, private investors such as family offices and high net worth individuals, and corporate investors seeking access to supply of produce for their business.

Investment in horticulture to date has focused on perennials where risks can be more easily mitigated compared to annual crops that are subject to weather, volatile markets and rapid changes in supply. Investment in other horticulture products is evolving and may be linked to export market opportunities.

Producer options include:
Expansion - Entering into an agreement with an external equity investor, pooling resources with strategically aligned businesses or leasing additional land
Exit - Selling the farm and possibly staying on as a manager or in a lease-back arrangement
Business as usual or steady growth/diversification utilising traditional sources of finance.

Some investors are interested in the first option (investing and becoming a business partner) as well as buying farms outright. Sometimes multiple farms are purchased by investors and aggregated into a large farming enterprise. Investors interested in sharing in an existing business look for large, profitable farming enterprises; skilled and experienced farm management; access to a secure water supply; business and financial proficiency of the owners; a comprehensive business plan outlining future growth strategies; and a good fit with their needs and motivations – the right partner.

The main reason to consider taking an equity investor is to enable a growth strategy. This could involve overcoming constraints associated with bank finance or partnering with a strategic investor to add value to both businesses. However, the process of becoming ‘investment ready’ is a long road and likely to be many years in development. It will require some rethinking of the way the business is operated and presented, which would generally benefit from some professional advice. There is a need to help producers to build the required finance and business skills.

Producers wishing to introduce external equity capital into their farming enterprise need to have a clear business plan for the future and a strategy for how to achieve it. They need to understand what they want from an investor and what they will need to give in return. Potential impacts of taking external equity investment include dilution of returns, potential loss of control and the complexity associated with dealing with a third party. In most cases operational control of the business remains with the producer while the investor is involved in strategic decisions, regardless of whether the investor owns more or less than 50% of the business.

We conclude that the region’s high value horticultural production is in an early stage of development and will require considerable effort and capital over a period of time. Investment from outside the region will be needed to drive the majority of development. Investment is needed to develop and increase the scale of high value horticulture production and related infrastructure such as storage, packing and processing facilities.

While some of this may be undertaken by the region’s existing producers, it is expected that investors from outside the region will drive the majority of this development. These investors are likely to include large or corporate horticultural producers investing in the region as a strategic move to increase and/or diversity their production and packing operations. Other investors are unlikely to have expertise in horticulture production and will need to recruit farm managers with the necessary experience and expertise to manage large scale production.

QMDB growers wishing to participate in the development of high value horticulture could consider partnering with investors from outside the region through external equity finance or a joint venture arrangement.

KeywordsMurray Darling Basin Regional Economic Diversification Program
ANZSRC Field of Research 2020300210. Sustainable agricultural development
300802. Horticultural crop growth and development
350208. Investment and risk management
Public Notes

Unpublished USQ project.

Byline AffiliationsAustralian Centre for Sustainable Business and Development
College for Indigenous Studies, Education and Research
Permalink -

https://research.usq.edu.au/item/q3ww4/murray-darling-basin-regional-economic-diversification-program-a-review-of-equity-capital-investment-in-the-development-of-high-value-horticulture

Download files

  • 1877
    total views
  • 207
    total downloads
  • 3
    views this month
  • 0
    downloads this month

Export as

Related outputs

Australian Centre for Sustainable Business and Development Collaborative Data Space
Cotter, Julie. Australian Centre for Sustainable Business and Development Collaborative Data Space. Toowoomba. https://doi.org/10.26192/9x42-6x23
From traditional to off-farm equity financing in family farming: evidence from Australia
Mohsin, Mohd.. 2018. From traditional to off-farm equity financing in family farming: evidence from Australia. PhD Thesis Doctor of Philosophy. University of Southern Queensland. https://doi.org/10.26192/5c0dd4edf69db
Brisbane West Wellcamp Airport Perishable Goods Facility: preliminary feasibility study
Dunne, Tony and Cotter, Julie. 2015. Brisbane West Wellcamp Airport Perishable Goods Facility: preliminary feasibility study. Unpublished.
A marginal abatement cost analysis of practice options related to the NLMP program
Cotter, Julie, Glass, Roderick, Black, John, Madden, Patrick and Davison, Tom. 2015. A marginal abatement cost analysis of practice options related to the NLMP program. Australia. Meat & Livestock Australia.
Does the market price the nature and extent of earnings management for firms that beat their earnings benchmark?
Lento, Camillo, Cotter, Julie and Tutticci, Irene. 2016. "Does the market price the nature and extent of earnings management for firms that beat their earnings benchmark?" Australian Journal of Management. 41 (4), pp. 633-655. https://doi.org/10.1177/0312896216641600
The Influence of Non-State Actors on Corporate Climate Change Disclosure
Cotter, Julie. 2013. "The Influence of Non-State Actors on Corporate Climate Change Disclosure ." Cadman, Timothy (ed.) Climate Change and Global Policy Regimes:Towards Institutional Legitimacy. United Kingdom. Palgrave Macmillan. pp. 232-247
Big data based intelligent decision support system for sustainable regional development
Zhou, Hong, Noble, Christopher and Cotter, Julie. 2015. "Big data based intelligent decision support system for sustainable regional development ." 2015 International Conference on Big Data Intelligence and Computing (DataCom 2015). Chengdu, China 19 - 21 Dec 2015
An analysis of the socio-economic factors influencing the adoption of conservation agriculture as a climate change mitigation activity in Australian dryland grain production
Rochecouste, Jean-Francois, Dargusch, Paul, Cameron, Donald and Smith, Carl. 2015. "An analysis of the socio-economic factors influencing the adoption of conservation agriculture as a climate change mitigation activity in Australian dryland grain production." Agricultural Systems. 135, pp. 20-30. https://doi.org/10.1016/j.agsy.2014.12.002
Queensland Watt Savers final report
Wiesner, Retha and Cotter, Julie. 2015. Queensland Watt Savers final report. Brisbane, Australia. CitySmart.
Corporate climate change disclosure practices and regulation: the influence of institutional investors
Cotter, Julie and Najah, Muftah. 2013. "Corporate climate change disclosure practices and regulation: the influence of institutional investors." Young, Suzanne and Gates, Stephen (ed.) Institutional investors’ power to change corporate behaviour: international perspectives. Bingley, United Kingdom. Emerald. pp. 81-97
Modelling greenhouse gas emissions abatement options for beef and sheep farm businesses
Tomlinson, Adam, Keogh, Mick, Glass, Roderick and Cotter, Julie. 2013. Modelling greenhouse gas emissions abatement options for beef and sheep farm businesses . Sydney, Australia. Australian Farm Institute.
Sustainability reporting and assurance: a historical analysis on a world-wide phenomenon
Mori Junior, Renzo, Best, Peter J. and Cotter, Julie. 2014. "Sustainability reporting and assurance: a historical analysis on a world-wide phenomenon." Journal of Business Ethics. 120 (1), pp. 1-11. https://doi.org/10.1007/s10551-013-1637-y
GRI guidelines for assurance of sustainability reports: Fortune global 500 list 2010 analyses
Mori Junior, Renzo, Cotter, Julie and Best, Peter. 2012. "GRI guidelines for assurance of sustainability reports: Fortune global 500 list 2010 analyses." 2012 Australian GRI Conference on Sustainability and Integrated Reporting: Innovate, Integrate, Collaborate (GRI 2012) . Melbourne, Australia 26 - 28 Mar 2012 Sydney, Australia.
Sustainable investment: a tool for decision makers
Byrne, Nick and Cotter, Julie. 2012. Sustainable investment: a tool for decision makers. Brisbane, Australia. University of Southern Queensland.
Corporate governance quality, incentive factors and voluntary corporate governance disclosures in annual reports of Malaysian publicly listed companies
Lokman, Norziana, Cotter, Julie and Mula, Joseph. 2012. "Corporate governance quality, incentive factors and voluntary corporate governance disclosures in annual reports of Malaysian publicly listed companies." Corporate Ownership and Control. 10 (1), pp. 329-352.
Institutional investor influence on global climate change disclosure practices
Cotter, Julie and Najah, Muftah M.. 2012. "Institutional investor influence on global climate change disclosure practices." Australian Journal of Management. 37 (2), pp. 169-187. https://doi.org/10.1177/0312896211423945
Institutional investor influence on global climate change disclosure practices
Cotter, Julie and Najah, Muftah M.. 2011. "Institutional investor influence on global climate change disclosure practices." Dynamics of Investing Responsibly: From Screening to Mainstreaming (2011). Sydney, Australia 24 - 25 Nov 2011 Sydney, Australia.
IFRS adoption and analysts' earnings forecasts: Australian evidence
Cotter, Julie, Tarca, Ann and Wee, Marvin. 2012. "IFRS adoption and analysts' earnings forecasts: Australian evidence." Accounting and Finance. 52 (2), pp. 395-419. https://doi.org/10.1111/j.1467-629X.2010.00392.x
Corporate governance quality and voluntary disclosures of corporate governance information: practices of listed Malaysian family controlled businesses
Lokman, Norziana, Mula, Joseph M. and Cotter, Julie. 2011. "Corporate governance quality and voluntary disclosures of corporate governance information: practices of listed Malaysian family controlled businesses." Doyle, Karen (ed.) FBA 2011: Family Business Research, Practice and Policy: Interpretation and Integration . Perth, Australia 31 Aug 2011 Sydney, Australia.
Standardized reporting of climate change information in Australia
Cotter, Julie, Najah, Muftah and Wang, Shihui Sophie. 2011. "Standardized reporting of climate change information in Australia." Sustainability Accounting, Management and Policy Journal. 2 (2), pp. 294-321. https://doi.org/10.1108/20408021111185420
Asset revaluations and assessment of borrowing capacity
Cotter, Julie and Zimmer, Ian. 1995. "Asset revaluations and assessment of borrowing capacity." Abacus: a journal of accounting, finance and business studies. 31 (2), pp. 136-151.
Board and monitoring committee independence
Cotter, Julie and Silvester, Mark. 2003. "Board and monitoring committee independence." Abacus: a journal of accounting, finance and business studies. 39 (2), pp. 211-232. https://doi.org/10.1111/1467-6281.00127
Asset revaluations and debt contracting
Cotter, Julie. 1999. "Asset revaluations and debt contracting." Abacus: a journal of accounting, finance and business studies. 35 (3), pp. 268-285. https://doi.org/10.1111/1467-6281.00046
The whole of university experience: retention, attrition, learning and personal support interventions during undergraduate business studies
Willcoxson, Lesley, Manning, Mark, Wynder, Monte, Hibbins, Ray, Joy, Sally, Thomas, Jan, Leask, Betty, Girardi, Antonia, Sidoryn, Tristana, Cotter, Julie, Kavanagh, Marie, Troedson, David and Lynch, Bernadette. 2011. The whole of university experience: retention, attrition, learning and personal support interventions during undergraduate business studies. Sydney, Australia. Australian Learning and Teaching Council Limited.
Accrual and cash flow accounting models: a comparison of the value relevance and timeliness of their components
Cotter, Julie. 1996. "Accrual and cash flow accounting models: a comparison of the value relevance and timeliness of their components." Accounting and Finance. 36 (2), pp. 127-150. https://doi.org/10.1111/j.1467-629X.1996.tb00303.x
Beyond the first-year experience: the impact on attrition of student experiences throughout undergraduate degree studies in six diverse universities
Willcoxson, Lesley, Cotter, Julie and Joy, Sally. 2011. "Beyond the first-year experience: the impact on attrition of student experiences throughout undergraduate degree studies in six diverse universities." Studies in Higher Education. 36 (3), pp. 331-352. https://doi.org/10.1080/03075070903581533
An analysis of factors influencing asset writedowns
Cotter, Julie, Stokes, Donald and Wyatt, Anne-Marie. 1998. "An analysis of factors influencing asset writedowns." Accounting and Finance. 38 (2), pp. 157-179. https://doi.org/10.1111/1467-629X.00008
Voluntary disclosure research: which theory is relevant?
Cotter, Julie, Lokman, Norziana and Najah, Muftah M.. 2011. "Voluntary disclosure research: which theory is relevant?" The Journal of Theoretical Accounting Research. 6 (2), pp. 77-95.
Sustainable investment: a tool for decision makers
Byrne, Nick and Cotter, Julie. 2010. "Sustainable investment: a tool for decision makers." Peyvandi, Ali and Eide, Molly (ed.) APC 2010: 22nd Asian-Pacific Conference on International Accounting Issues. Gold Coast, Australia 07 - 09 Nov 2010 Fresno, CA, United States .
The technostructure gap: the educational qualifications of executive and non-executive directors
Phillips, Peter J. and Cotter, Julie. 2010. "The technostructure gap: the educational qualifications of executive and non-executive directors." Corporate Ownership and Control. 7 (4), pp. 102-113.
Audit committees and earnings quality
Baxter, Peter and Cotter, Julie. 2009. "Audit committees and earnings quality." Accounting and Finance. 49 (2), pp. 267-290. https://doi.org/10.1111/j.1467-629X.2008.00290.x
Corporate governance, sustainability and the assessment of default risk
James-Overheu, Christina and Cotter, Julie. 2009. "Corporate governance, sustainability and the assessment of default risk." Asian Journal of Finance and Accounting. 1 (1), pp. 34-53.
Disclosure versus recognition: The case of asset revaluations
Cotter, Julie and Zimmer, Ian. 2003. "Disclosure versus recognition: The case of asset revaluations." Asia-Pacific Journal of Accounting and Economics. 10 (1), pp. 81-99.
Corporate governance disclosure and the assessment of default risk
James, Christina and Cotter, Julie. 2007. "Corporate governance disclosure and the assessment of default risk." OBEC 2007: Oxford Business and Economics Conference. Oxford, United Kingdom 24 - 26 Jun 2007 Oxford, United Kingdom.
Relevance of parent entity financial reports
Cotter, Julie. 2004. Relevance of parent entity financial reports. Melbourne, Australia. Australian Accounting Standards Board.
Utilisation and restrictiveness of covenants in Australian private debt contracts
Cotter, Julie. 1998. "Utilisation and restrictiveness of covenants in Australian private debt contracts." Accounting and Finance. 38 (2), pp. 181-196. https://doi.org/10.1111/1467-629X.00009
Reliability of asset revaluations: the impact of appraiser independence
Cotter, Julie and Richardson, Scott. 2002. "Reliability of asset revaluations: the impact of appraiser independence." Review of Accounting Studies. 7 (4), pp. 435-457. https://doi.org/10.1023/A:1020763612369
Expectations management and beatable targets: how do analysts react to explicit earnings guidance?
Cotter, Julie, Tuna, Irem and Wysocki, Peter D.. 2006. "Expectations management and beatable targets: how do analysts react to explicit earnings guidance? " Contemporary Accounting Research. 23 (3), pp. 593-624. https://doi.org/10.1506/FJ4D-04UN-68T7-R8CA
Offer pricing of Australian industrial initial public offers
Cotter, Julie, Goyen, Michelle and Hegarty, Sherryl. 2005. "Offer pricing of Australian industrial initial public offers." Accounting and Finance. 45 (1), pp. 95-125. https://doi.org/10.1111/j.l467-629x.2004.00137.x