Agribusiness

Opportunity for agribusinesses to capitalise on positive outlook: CBA

Grain Central, July 14, 2020

WHILE the impacts of coronavirus have been widespread across the economy, the outlook for many parts of Australia’s agribusiness sector is strong and growing, according to Commonwealth Bank’s Regional and Agribusiness division.

CBA’s executive general manager regional and agribusiness, Grant Cairns, said there was optimism and an appetite for investment in the sector, and supporting agribusiness would be essential to growing the economy.

Grant Cairns

Mr Cairns said Australian agribusiness was experiencing a level of opportunity across many sectors that had not been seen for years, with favourable market conditions, good seasonal conditions in most regions, and a consumer focus on fresh produce.

“The sector has a very strong outlook – largely due to recent rainfall in many regions across the country, combined with low interest rates, increased land values, many commodity prices holding strong and market demand for our Australian produce,” he said.

“That said, we know this isn’t the case for all, and we continue to support our customers who are faced with challenging conditions, as we assist others who are looking to target new opportunities.”

Mr Cairns said many agribusinesses, particularly in the southern states, had been seeking new funding over the past few months for working capital to expand, restock, sow crops, diversify their businesses, or invest in new machinery and technology to improve productivity.

“Many producers are looking to replace their older equipment, and take advantage of the Government’s investment allowance and the favourable seasonal conditions,” he said.

“Ag machinery financed through our asset finance team has seen an increase of 27 per cent year-on-year, and three of the last four months have posted the strongest volumes of new asset finance business that we’ve seen in the past two years. This signals a strong trajectory into the new financial year where our agribusiness customers appear to be increasingly confident making these capital purchases.

“Our Regional and Agribusiness Banking team recently held a live webcast attended by almost 200 farmers and the sentiment was resoundingly positive. They’re keen to know how to protect themselves against some of the global market challenges, but importantly they’re very interested in capitalising on current opportunities.”

Consumer interest

Mr Cairns said a growing consumer interest in the origins of food also represented a significant opportunity for agribusinesses to consider different products and new ways to take them to market.

“With a recent focus on food security and supermarket shortages, a light has shone on agriculture’s status as one of the most critical pillars of our economy,” he said.

According to research from CBA’s Global Economic & Markets Research team, household spending at grocery stores and supermarkets – including spend on fresh produce – has increased considerably over the past few months, compared with the same period last year.

“Our data is telling us that spending at supermarkets and grocery stores has been consistently (each week) running about 25 per cent higher throughout May and June and even this first week of July, compared to this time last year – I think this represents a real opportunity for the agriculture sector,” Mr Cairns said.

“We’ve heard from many growers who see this change as an opportunity to rethink the old ways of working and consider new business models that might include consolidations, diversification and even collaborations with other producers to meet changing market demand and consumer preferences, and explore where their next opportunity might come from.”

Source: CBA

 

 

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