 I think it's been an interesting discussion and to some extent a lot of the discussion has been family farms or corporate farms and it's about capitalisation and where their money comes from and I think to some extent we ignore the fact that there's a lot more variation within each of those categories than there is between those categories and I think the thing that really matters for most of them is about intellectual capital rather than the dollars and it's intellectual capital I think that drives the difference that we see between farm performances and I think it's interesting when you look at the asset management sector if you like the more corporate part of Australian agriculture where we see funds and institutional money coming in I think we're actually seeing a transition in the asset managers and so 10 years ago where the track record I think was I'd say politely embarrassing but patchy depending on your point of view a lot of those asset managers actually came up as jacaruzes came through the traditional system had a traditional view of agriculture you look at now the asset managers in agriculture most of them are tertiary qualified experience in agriculture or finance or some combination thereof and I think we're actually seeing the skill level increased substantially in the asset management business and I think that bodes very well for the future of of if you like corporate agriculture I want to cover a few issues I want to talk a little bit about performance and and I think this is it's still a very interesting story and we've got a lot to learn from it I want to talk a bit about pros and cons of if you like the institutional corporate end versus the family farm end and and quite a few of what I'm going to say really just reflects what others have said before and a few other bits and pieces that I want to throw into the mix so the track record part of the issue we've got with with corporates and I talk more about institutional type investments rather than very large-scale family farms is it's not very transparent what their performance has been and I think for a lot of them the philosophy has been it's better to be thought of as a second-rate manager than to be proven as one and and so a lot of the track record is not out there in the public domain and and so what I've tried to do is look at returns for a number of corporate type agricultural operations this is adding to some stuff I did for the Farm Institute a couple of years ago and basically we've taken the first or the performance per annum for an investment that started in the year 2000 or from commencement whichever was earlier and we've looked at total investor returns for those entities and expressed it as a per annum result so you can see there we've got some pretty high highs we've got a 45 per annum return for one and we've got some pretty sad numbers there as well as a general comment and I'm not going to say who's who other than other than growth farms is number six where we're transparent about our operating return we don't have long-term capital growth data at this stage so we can't give a total investor return but the ones that are giving the very high returns tend to be ones that are listed not all the ones that are listed but often often their profits are capitalised up at high rates on the on the share market so their their agricultural companies of some description that have been that are listed and get an extra boost from having a high multiple in their performance generally down in the bottom half are the ones that invest in farms operate or lease those farms and they haven't exactly covered themselves in glory and so to Barnaby's question this morning why haven't institutions invested in agriculture there's your answer it's been often a pretty poor performance we need to fix that we need to get it turned around and we need to offer competitive returns with those that investors can achieve in other sectors and we need to be competitive with other sectors within agriculture so we have some work to do I think it is you know we're there's a range of reasons why some of those don't perform and I'm happy to give you my opinion on that and you can take it or leave it as we go I'll talk a little bit more about growth farms track record simply because that's where I've got the best information and the question is how does it compare to family farms so if we look at this we've got growth farms performance in the dark red and we've got a bears average all broad acre index from operating return only so we've done 4.1 percent the average all broad acre index is 1.5 percent over the same period you can argue that we have better scale so we're managing farms that on average are capitalised with 12 million dollars so maybe we've got a scale advantage which is which is giving us some of that if we look at our track record compared to the top quartile of the broad acre index we're about on par over that period I actually think that's quite reasonable because the broad acre index actually has good farms coming and going from it over any one period so the repeatability of performance of top quartile farms is not actually that high so you're actually measuring different farms in different years because they come and go from being within the top quartile so I don't think there's any doubt that that you can compete with the returns from family farms we can out do the returns from the bottom end of the sector because we know there are so many laggards and it's relatively easy to out compete them if you compare to the top group we think we can achieve comparable operating returns as those I think the question about what drives performance and I think there's really two things that drive performance you've got to buy well and you've got to manage well your stuff up either of those your stuff up the returns so you go in and you pay 20 to 30 percent over the market basically there you go you've you've done your capital growth for the next five years maybe longer something like that but not only that you've depressed your return on capital during that period so fundamental is to buy well and I think institutions or asset managers on behalf of institutions or endowments often struggle to do this and it's one of the disadvantages they suffer is that you're given a bucket of money say a hundred million dollars and say go to it invest it over two years what you haven't invested the end of two years will take back so there's a strong imperative of the asset manager get the money spent and that may mean that it's spent on assets that are overpriced or not good enough quality and so it's a real issue to try and meet the objectives of these institutional investors with large check sizes who want the money invested over relatively short timeframes one way people do it is to go on by large scale farms go on by 50 million 100 million dollar farms or aggregations and that in itself brings particular issues because there are very few aggregations that you look at that you'd want to own the whole lot and quite likely you would want to own some of the assets which are high quality but often you got some rubbish in there as well often those larger scale assets get pushed by the market because there's other people chasing opportunities to deploy big chunks of capital and so they tend to get overpriced so you've got a number of issues trying to deploy the capital well but at the end of the day if you don't buy well you might as well not start you'll be behind it from the eight ball so I think the challenge for larger scale investors is is having that ability the flexibility to buy well one of their advantages is you if you've got the right mandate from the investor is you can invest on on a range of sectors in a range of geographies so it becomes easier to deploy the capital so if you can put some in sugar in northern Australia and some in wheat in western Australia you're a lot more buying opportunities than if someone says you're going to put it all into into nuts in Miljura we're obviously going to push asset prices the second part is managing well and and fundamentally you know I think there's been a lot of ideas that really don't focus on what matters at farm level and essentially if we look at most Australian agricultural businesses they're in the commodity business what's the key thing to get right in your commodity in a commodity business is to be the lowest cost producer sustainably obviously and over the long term so the reason bhp and Rio can and continue to survive and make profits apart from their write downs and other things but they're making cash surpluses is because they're low cost producers they're at the bottom end of the cost curve and it's a concept that I think we ought to talk more about in agriculture we need producers to focus on getting down the bottom end of the cost curve so they're producing beef at the at the lowest cost per kilo or the lowest cost per ton of wheat and that is much much more important than getting the premium price and and so often we see these ideas I think David talked about it where people go in and they're going to go up the supply chain they're going to command a premium they're going to capture the value and they're going to open a chain of butcher shops through Asia or whatever they're going to do and they just blow up their expertise is in managing farms and when you start trying to capture that premium off farm downstream it's a completely different business to be in and and so the focus has got to be on being low cost efficient producers so it's not about being the cheapest in terms of having the lowest absolute cost it's about the lowest cost per unit per ton or per kilo or whatever you're producing so managing well is fundamental to it but it's relatively simple if you get three or four things right the problem is I think in agriculture we tend not to understand the key drivers broadly particularly in the livestock sector we tend to get muddled about what matters and what doesn't matter and as a consequence we make poor decisions about what drives profitability so if we look at the pros and cons and I start off with this slide putting some in red because I thought they were disadvantages and some left those they were but the reality is they they're the pro there can be a plus in one scenario and a minus in another scenario so I left them all the same color but the corporates obviously have got buckets of capital so that helps them sort of capitalise the business properly from the start not necessarily to buy the biggest but to get the business properly properly capitalised so if you buy it for five million or ten million and it needs two million a capex on it it's all clear up front and done so you've got access to the capital the corporates can move family farms they tend to be based in a in a community in a regional area and and if they want to expand they'll tend to want to do it within a reasonable distance unless they're prepared to say I'm going to the other end of the country and that's more unusual than usual so so the corporates have an advantage in that they can see value in Western Australia at the moment or value in Northern beef that'd be surprising wouldn't but maybe it's there so so they can move the resources to where the opportunities are it's much harder for a family farm to do that and and the corporates have to be very conscious that their mandates give them flexibility to achieve that rather than locking them into a strategy for the next three years where the market may move the corporates should have some rigor around their analysis but as Dove Cornish says you can't farm on an Excel spreadsheet so I think the rigor is about what goes into the spreadsheet and and making sure that things like major increases in commodity prices aren't factored in to drive the returns if you can't achieve the returns on say five-year historical median prices don't even start getting price rises through the life of the investment because Asians want to eat more beef is great but if that's factored into your analysis then I think you're high risk before you even start yeah the corporates should have expertise and they do have access to expertise but it's about how you use that expertise they've also got constraints and I've talked about those things you've got costs that come on top of things which I'll talk a bit more in a minute they've got scale advantages but scale advantages I think are overplayed in agriculture there's certainly benefits of being having a farm capitalised to say 8 or 10 million compared to a farm at 2 million but is 20 mil better than 8 mil is 50 mil better than 8 mil and it's not there's actually evidence of diseconomies of scale and so the reason asset managers or corporates chase scale is for their own benefit not for the benefit of the operating scale of the business itself it's about managing asset or funds under management so the family farm you know has some on the other side of the coin there tend to be capital constraints so they can only make maybe two or four acquisitions in their lifetime without tipping the business or taking the risk of tipping the business over they tend to focus more locally but they've got very good very high level of local knowledge so there are things that are in favour of some and against others managing well I think you know one of the disadvantages the corporates have is the compliance and the overheads so to set the structures up you're writing out big checks to fat lawyers in fancy offices with great views of the harbour it adds nothing to the returns at the farm level but you've got to do it you've got no choice but to do that so you've got a lot more compliance and and the question is does does the advantages that a corporate offer in the scale and their flexibility and maybe their ability to to invest over a wider region more than compensate you for those additional costs sometimes they do sometimes they don't family farms are flat lean patient capital can be 20 year 50 year investment timeframes some corporates can do that others are there for seven or 10 years and if you're there for seven years if you've been there for the last seven years you've probably got no land appreciation apart from in the last six months because it's been flat so you've been unfortunate if you went in seven years ago so there's a mixture of pros and cons and I don't think one should automatically assume that one is better than the other it is about the intellectual capital that is brought to bear on the business to get it right and overcome the disadvantages and play to the advantages that each one offers so just briefly in terms of other thoughts you know talking to a range of investors you know Australia is of increasing interest and and there are a number of reasons for that a number of which are about our control the first two matter probably more than most our dollar is low so farms are 30% cheaper than they were two years ago if you're in the US or in Europe the US land prices have peaked and look like they're tipping over so investors are saying well North America is not so attractive anymore we've got good rule of law low subsidies all those things we've got incredibly diverse opportunities in Australia to invest you can go tropical agriculture the temperate permanent crops whole range of things we do though have to be globally competitive and we have to be globally competitive as producers but also our structures so stupid ideas of 1% FURB on investment coming into Australia do not help our global competitiveness likewise five and a half percent stamp duty you know so investors only end up with 94 cents for every dollar they put in before they've even started I think increasingly investors are becoming more sophisticated so you hear some of the conversation earlier about we'll go slowly we'll learn rather than jumping on board and going in wholesale with limited expertise we're seeing a combination of lease and operate models and I don't think there's one that's necessarily better than the other it is part of what the investors want they've got a whole heap of criteria that you've got to meet and sometimes they think why don't you just operate this because it'll give you the best returns over the long term but there are a whole heap of other reasons that matter and lastly Australia is increasingly seen as part of a global portfolio so we see investors saying I want to do this in Australia because we know that you're good at doing that and we say but what about concentrating at all in one sector or two sectors say doesn't matter we've got some in North America we're in South America we're in New Zealand so it's part of their big picture and Australia fits into that so I've got to wrap it up but I guess the key thing is that it's not one or the other one is not automatically better than the other I think it is about how well we bring intellectual capital to bear on the capital that we have available that makes the difference to the performance of the farms thank you