How the transformation of modern farming is creating opportunities for brokers

Today’s agribusinesses are entrepreneurial with an appetite to invest for growth. Stable, profitable and with high levels of equity, farmers are sought after by lenders and provide attractive opportunities for brokers.

Not only is agriculture a vitally important contributor to the Australian economy, it’s also one of our most capital-intensive sectors. Over the past decade, agribusiness has fundamentally transformed into a structurally efficient, resilient and innovative sector. And it’s been technology investment that has driven much of these productivity and sustainability gains.¹

What’s more, the long-term economic fundamentals of agribusinesses make the sector an attractive proposition for lenders, and in turn, a compelling opportunity for brokers.

Owning large businesses, today’s farmers are highly entrepreneurial. As Mark Bennett, Head of Agribusiness and Specialised Commercial, ANZ, explains, “there are fewer farmers today than there used to be, but they’re producing much more collectively. Bigger farms drive unit costs of production down through scale, so fixed costs go further, improving return on assets and cash generation.”

Ben Weber, Senior Relationship Manager, Specialised Agri adds, “most farming businesses are relatively easy to bank because most of them are profitable and have got strong levels of equity – so it's easy to add some debt into the capital mix.”

Funding opportunities for brokers

As agribusinesses have grown in the last 10 years, they’ve significantly increased their use of brokers. Weber elaborates, “there are a lot of brokers operating the agribusiness space, looking after clients with more than $5 million worth of debt.”

Brokers provide a valued service. “Agribusiness owners are time poor. They're looking for someone to handle the banking relationship effectively so they can concentrate on their business. A broker completes the application, gathers all the information, talks to the client's accountant and lawyers. Brokers know how to present this information to a bank to make sure that they've got the best chance of getting the client what they need,” Weber explains.

And the sector has a significant need for funding. “On large farming businesses, there are asset finance requirements for fast, large-scale machinery. Smaller farms require working vehicles such as utes, twin cabs, small tractors, large tractors, harvesting equipment, auto sprayers, seeding equipment and chaser bins,” Bennett says.

Weber agrees that most agribusinesses are proactive adopters of new technology, “including no-till farming, cameras that can detect a weed in a paddock and just spray that area, GPS-guided tractors that steer themselves and moisture probes  to assist in cropping and pasture management decisions” These technologies generate labour and other cost efficiencies.

“For livestock, when a sheep or cow comes into a pen, automatic drafting gates read a chip on the animal’s ear and send it one way or another way depending on sex, pregnancy, or if it's a certain weight. There's also a lot of focus on using technology to drive genetics,” Weber adds.

“When agribusinesses adopt technology, they can use the real-time data it generates to demonstrate how it makes their business more efficient and profitable,” says Weber. “They can then extrapolate that data to demonstrate the payback of additional technology investment. A wholesale change might have a payback period of five or ten years, yet access to high quality data means we can be really confident in our forecasts and take some risk off the table.”

How to build a broking business in agri

The benefits of working with agribusinesses are many. Here are some ways to expand your broking business into the sector:

• Local networking. “To grow a broking business in this industry, you’ll need to be involved locally, naturally curious, and networked – being seen and making people aware of you,” Bennett says. “There are a range of industry events on the farming calendar – from field days to commodity conferences – the kind of opportunities to either attend and meet people or to invest in a presence that has your brand and your offering, where people will come and ask you what you do and how you can help them.”
• Partnering. Teaming up with other people or businesses that are already networked in the industry can also be a way in. Weber recommends “finding a colleague or connection that is doing some agricultural work and talking to some agribankers, because it is quite a nuanced field. Most of the brokers that we see are ex-agribankers or ex-farmers.”
• Word of mouth. Because farmers tend to trust the people they trust, “doing a great job with customers and generating word-of-mouth referrals is the best way to grow. And if a farmer can see a good farm that’s getting a great outcome with broker X, then broker X stands a good chance at getting a call from the farm nearby,” Bennett says.

Benefits of working with a bank that specialises in agri

Brokers also benefit from ANZ’s commitment to its specialist agribusiness capability. Weber explains, “we have the industry knowledge, we're on the ground in our communities, and we know our customers. We have the time to devote ourselves to just agribusiness rather than trying span across multiple industries. Most of us have history in agribusiness – we’re bankers who can walk the talk.”

Lastly, the rewards for brokers who specialise in agribusiness are more than financial. “Being a valuable partner to a farming business is very rewarding – it’s very personal. You're often entrusted with producing outcomes that are significant for a family over the longer term in a very dynamic environment,” Bennett says.

Learn more

To find out more about opportunities for brokers in Australia’s growing agribusiness sector and the specialist support ANZ provides brokers, contact an ANZ Broker Manager or explore Agribusiness.

Note: This article was originally published on the Mortgage Professional Australia website.