DO not fall in love with the farm.
It's a blunt approach but a pillar to an increasingly successful farming business model within the sugar industry.
Managing director of Australian Cane Farms Limited (ACF) Steve Kirby provided an overview and insight into how the company continues to grow under a clinically business-like approach at the CaseIH Step Up conference in Bundaberg last week.
ACF has become one of Australia's largest sugar cane farm aggregations, south of Townsville.
Mr Kirby, who is based in Sydney and was a Queensland Sugar Limited director, is a co-founder of ACF with Leigh Opit, a former Rothschild Australia director.
ACF was established in 2005, going from an initial holding of two farms of 280 hectares of cane land to 2250ha today all within the Burdekin region of North Queensland.
It boasts $60 million in assets, cutting about 120t/ha.
Mr Kirby said corporate farming was about efficiency and investability.
He said efficiency was not so much about farming efficiency (although that was important) but more about the efficient allocation of funds to the areas which will get the most growth.
The process of "creative destruction" was a necessity, according to Mr Kirby, where the resources held by the inefficient are allocated to those whom can make them work better.
That presents a challenge though.
"Most institutional investors are unwilling to invest in upstream agriculture opportunities," he said.
"Investability is really a discussion about size. The effort to invest $100 million is the same as investing $1 million."
He said scale was the only way to secure equity investment. In order to do that, Australian farming must get much bigger.
"It's not about how you farm, but how much you own," he said.
"There is no exciting future in a middle sized, middle of the road farming. You have to be big or you have to be small."
"The guy in the middle doesn't get the premium price but he doesn't always get the volume of scale either."
Small or niche farming, according to Mr Kirby, had the benefit of being able to charge a premium to customers and provide a great deal of provenance to their products.
Large scale farming made its money off shear scale, producing food at industrial levels.
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"We follow the data but we don't fall in love with our asset," he said.
This isn't to say the company didn't care what happened at ground level.
One particular point of difference at the farm gate was ACF's focus on the content of cane sugar (CCS) rather than tonnes of cane produced.
Sugar mills pay a premium for cane with higher sugar content. ACF's rolling three-year average CCS is 15.55.
Mr Kirby said when the company secured about 1400ha of land it was able to justify having a sole contractor that harvested just for it, meaning it could start timing when various cane varieties were cut.
He said by growing and harvesting different varieties which have higher CCS at different points throughout the season, the business was able to add about $1200/ha in additional revenue.
Costs and revenues were measured in US cents per pound, as the global sugar market operated at the New York 11 price, which was in the same ratio.
The business also grows alternate crops such as summer legumes (soy/mung beans) and winter grasses (corn/maize/sorghum).
Mr Kirby said apart from the environmental benefits of this, alternating crops breaks up the monotony for staff and allows it to keep staff on over a longer period.
Another point that makes ACF a low-cost operator was its machinery policy.
"We turnover gear very regularly. Unit down time is a killer," he said.
The economies of scale were also improved with two dual-row planters.
"That means we are planting four rows of cane at a time," Mr Kirby said.
"We get about 25ha/day with each machine so with both going we can do 50ha/day.
"That means we can put a lot of cane in the ground in a short window."
Money in cane
AT a time when the phrase "sunset industry" has been used in reference to the sugar sector, ACF has a bigger picture in mind.
"Growing sugar cane is one of the most profitable and predictable operations in agriculture," he said.
Mr Kirby said agriculture was the right space to invest in, and cane was even more attractive within that.
"It's very easy to lose a dollar but very hard to make one," he said.
With his investor hat on, he said it was important to be in an industry that could "pay the rent and keep the lights on".
Sugar cane is only grown in tropical climates and they aren't making any more land in those places.
- Steve Kirby, ACF
"Cane is quite predictable - you can always pay the rent," he said.
He sugar was one of the few commodities in the world with a clearly transparent market through the NY11 world price.
Growers did not have to sell to Coles or Woolworths and therefore quality was not such an issue, particularly as the milling process turned all cane into grade-one sugar.
In surfing parlance, he spoke about being "positioned for the wave", suggesting that the world demand for sugar for the projected 10 billion people on earth by 2050 will see the need accelerate.
"That wave is coming," he said.
"You've got to be positioned for the wave. If you want to catch the wave, you have to own the farm."
"Sugar cane is only grown in tropical climates and they aren't making any more land in those places."
He said the Burdekin area suited the business because even though a buyer will pay more for land and water there, overall the returns were better.
They are good wages and that would encourage a more vibrant community.
- Steve Kirby, ACF
Mr Kirby also encouraged growers contemplating expansion to keep an emotional distance from the farm.
"If you fall in love with your asset, you're never prepared to sell it," he said.
"I don't live on the farm precisely for that reason."
While going big is one thing, Mr Kirby rejected the idea of owning or building another sugar mill.
"In short, there are very good millers up and down the coast who can do that job," he said.
Staff have buy-in
ACF may only employ about 10 people but Mr Kirby said getting good people into the business was critical.
About eight of these employees were on-farm workers and growers.
"We want to give those guys the ownership of what they do," he said.
"There are probably less people in aggregate but each one of those people are engaged as they possibly can be."
"We never struggle to find good people but we worry about it every day."
He said the wages the company pays were "first class".
"They are good wages and that would encourage a more vibrant community," he said.