I want to collaborate with other (farmers) and get lower costs and higher returns (etc)
We grow [wool beef cotton vegetables] and know that we aren’t the only ones with high [transport] costs. We have heard the government is providing resources for farmers to set up co-operatives and do collaborative business structures. How do we get funding and advice to set up a company or co-op? What is the best business structure for us?
The four essential steps to lowering farm costs through collaboration:
Know your business model and costs. What is the point in the value chain you can maximise your profit or minimise your cost if you collaborate with others in a similar situation to yours?
Know your potential collaborators. Who is your ally and who isn’t? Who would be interested in sharing cost burdens and creating mutual benefits for increased profitability? At the same time, who else is in the same space with a vested interest who might try to block your collaboration.
Know your resources. You don’t have to pay for everything yourself to get started! There are free and subsidised resources for people who want to work together to improve profitability in Australia’s food and fibre sector. The Federal Government is an active supporter of farm and farm service collaboration, especially through the Farm Co-operatives and Collaboration Pilot Program, Farming Together, which can help guide you through the process of collaborating with other producers and suppliers. Farming Together will even pay for expert management consultants and legal advisers to help you plan your business structure and get your company or co-operative incorporated and registered, in all Australian jurisdictions. The peak body for co-operatives and mutuals in Australia is the Business Council of Co-operatives and Mutuals, which provides a range of downloadable resources for co-operatives across the Australian economy.
Know your advisers. To collaborate successfully, you need the right professional experts to advise you and create your incorporation and compliance documents, and to show you how to run your co-operative. Economical and effective corporate governance means being aware of financial reporting and directors’ duties requirements, and it is essential to have the right lawyers and accountants on your side, who know and understand your business. Many claim expertise, but who do you trust? Private practice professional advice is available from lawyers and accountants with experience and qualifications – but make sure they hold a current practising certificate and have professional indemnity insurance before you sign the costs agreement!
I want to protect / obtain my water entitlements
Water didn’t used to be a problem in our business, the property always had stock and domestic water rights and with the irrigation we paid the charge like everyone else. In the last ten years or so it’s all changed; larger players are moving into the district and water has become very expensive. We’ve had to make difficult choices about what crops to grow and even whether we can keep the farm. A few years ago we sold some of our water entitlement and now it’s too expensive to get the water back to farm the way we used to. Another problem is the metering system isn’t reliable; the new meters the water company put in weren’t up to standard; some of our neighbours have given up irrigation altogether because they got hit with large water bills even though they hadn’t changed their crops or farming methods. Then they had to pay to get rid of their water delivery entitlements even though they weren’t using any water. We have taken a cautious approach to our irrigation but now we are worried our water entitlement will be cut because we haven’t used all of it in the past two years. Can the water company do that?
The government is taking my land
The government sent me a notice that my land is going to be compulsorily acquired. I live on the edge of town and I knew a new road was coming through here, but now they’ve changed the route and it goes right through my house. I own the next door block as well and I was going to develop it later. That was my investment strategy. Under the law they are meant to give me a fair market price but the offer they’ve made is lower than other properties in the district. How can I get a fair price?
We have a problem with a neighbouring party about land and water access
Our business uses groundwater. The water comes from bores on a neighbouring area of land. It hasn’t been a problem in the past, but the pastoral lease on that land has been sold to another company. The new lessee wants us to pay for access to the bores and wants some of the water for its own use. Our board has made a number of offers to the other party but now they have written threatening legal action.
We want to develop new land for farming
The government has given our company the rights to developing new land for irrigated agriculture. Part of the plan is to bring in new farmers to take up some of the lots. However, the government has not progressed land tenure in the area, we only have a license to be on the land, no lease and no freehold. Until we have certainty of land tenure we can’t finalise the water supply and no other investors are willing to come in and farm.
We have a problem with Native Title / Aboriginal Heritage
We want to expand our traditional cattle business by increasing capacity for finishing and also introducing a feedlot operation. Our view is this is consistent with the Indigenous Land Use Agreement for the region and in fact we are legally required to develop economic opportunities. However we have received a notice that land for the project is protected under the Aboriginal Heritage Act and the ground cannot be disturbed.
We have a problem with environmental approvals
We are licensed to take water for our food and fibre production and as part of the water licence we are required to ensure the water resource is not degraded. Usually we don’t have problem but sometimes after heavy rain overflow from the local waste water treatment plant enters our system. This shows up in our tailwater monitoring but the water treatment plant operator insists it is compliant with its environmental permit and any problems are caused by our use of fertilisers and chemicals, not their emissions. The state water department says we are in breach of our water licence, for which penalties may be applied if we do not improve our performance. We have found out that the water treatment plant has a health department permit but they won’t answer our questions about environmental approval for their activities.
We have a corporate governance problem
We are a co-operative established fifty years ago and generally things have run well for members. However now a small group of members wants to take advantage increased commercial investor interest in agriculture and convert the co-op into a company so that outside investors can buy shares. A large number of members want to remain as a co-op. We understand that such an important proposal should be dealt with by members in a general meeting, but some of the directors have said it is a board matter.
We need to get funding / capital into our organisation
We started out as a not-for-profit association but now we want to do a project that would return a share of profits to member investors. We would also like to take advantage of recent changes to the law that enables easier crowd-sourcing of funding. We need to retain the benefits of the past while restructuring to get this new project implemented.
We don’t know the best way to structure our production assets
We make high-end fibre products and want to integrate some of the processing infrastructure into the production chain with costs shared between suppliers. However, we want to retain ownership of the design intellectual property for the products. We need to create the optimal business structure for these needs.
We don’t know the best way to maintain and replace our infrastructure assets
We are a new venture in the Australian agriculture industry and we have strong capital backing for our project, which involves multiple growers supplying our facilities. However it will be essential for success that the facilities and the infrastructure that supports them are maintained and replaced cost-effectively over the 30-40 year life of the project. Ideally the infrastructure cost and risk will be shared with suppliers. On that basis we need to know options for best complying with taxation and corporate governance rules.
We need a contract / commercial agreement to acquire new equipment and get maintenance /operations done
I plan to acquire some new equipment and infrastructure and I want to know if the legal purchase agreement I have been given is fair. Also it does not seem to provide for ongoing maintenance and repairs. There is a warranty but it costs extra, which would raise the price of the installation quite a lot. It’s not clear what is included in the warranty. There is a finance agreement attached to the purchase agreement, which requires a guarantor. There is also an indemnity.
I need a standard contract / commercial agreement for similar, repeating services (buying, selling)
We routinely get asked to apply for credit and enter into a credit agreement, when we purchase goods and services for our business. This creates risk for the business and due to the terms of these agreements also for us personally. Our business has grown to the point where we would like to have our own terms of trade for purchases from suppliers.