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Farm investment seminar examines rare opportunity

Tablelands livestock producers are facing a rare and welcome dilemma: How to best invest a “once-in-a-generation” cash surplus following one of the most buoyant five year periods in living memory.

Sustained high stock and wool prices, mostly favourable seasons, low interest rates and rapidly rising land values have provided a “purple patch” for land managers possibly not seen since the 1950s wool boom.

But while the Korean War induced surge in wool prices lasted only a year or so, the current profit boost has not only been shared by wool, lamb and cattle producers, it has coincided with a near decade long run of relatively favourable seasons following the devastating millennium drought of the early 2000s.

This rare coincidence of favourable trends has not only allowed land managers to pay down debt incurred in the lean drought years, it has allowed many to invest strongly in their own enterprises and to look beyond the farm gate at other options to secure their financial future.

While welcome, this presents some challenging and complex decisions that will have implications for years, if not generations, to come.

To explore ways for land managers to maximise their future potential and sustainability, South East Local Land Services is hosting a seminar in Goulburn on May 3 which will investigate future commodity prices and help farmers weigh up competing investment options.

Matt Lieschke, Senior Agriculture Advisor with South East Local Land Services said interest from regional livestock producers in investment opportunities and options had intensified as farm incomes had continued to improve.

“Despite concerns around current dry conditions, the latest report from Australian Bureau of Agricultural Resource Economics and Sciences (ABARES) shows that returns for both sheep and beef producers are predicted to be very strong.

“While average farm income is expected to be down slightly for the beef industry in 2017-18, farm cash income for the sheep industry expected to climb to $177,000, the highest recorded in the past 20 years,” he said.

While this is great news, farmers know that they can’t be complacent. Farm incomes are historically highly variable and things change quickly. With the possibility of a tough winter looming, investment decisions made now will be critical for future viability.

To help support those decisions, the seminar will bring together an expert panel of

speakers, including commodity analysts, Mark Hedley from the Australian Wool Network, and Angus Gidley-Baird from Rabobank.

Holmes Sackett farm business consultant, John Francis, will examine possible investment options and their implications on future farm performance while Tony Paton, Farm Ally, will explore the tax and profit implications of depreciation schedules on new farm purchases, Mr Lieschke said.

Local Producers Tom McGuiness and Charlie Bell will also be present on the day to provide

a local, hands on, perspective.

According to Mr Francis, current livestock prices were still producing good returns despite

rising land prices.

“Current farm operating returns exceed 4.5 per cent. Increased land values and future

commodity prices will determine whether these returns will continue.

“Profits are so good at the moment that a number of investments that previously didn’t rate are now generating reasonable returns” He said.

The key point is to know how to assess the options to make sure that every additional dollar spent generates more than the value of the investment.

“These are complex and difficult decisions. It’s not a simple equation where one plus one equals two. Gut instinct and emotion are typically used and these aren’t necessarily bad when used in conjunction with other decision making skills. It is when these are used alone that some operators get caught out,” Mr Francis said.

“Some decisions require greater objectivity and analysis, particularly when weighting risk against reward.”

The seminar will be held at the Mercure, Goulburn on 3 May commencing at 8:45am. The seminar is $22 per person and bookings are essential. To register for this event go to www.eventbrite.com.au and type ‘Local Land Services Goulburn’ into the search bar.

For further information contact the Goulburn Local Land Services Office on 4824 1900.

ENDS

Media contact: Dave Michael, South East Local Land Services, 0418 513 880