Ever since white settlement in Australia there has been the problem of absentee-investor owners; people with little or no interest in the bush, who are simply out to make maximum dollars for minimum effort. Such profit chasers invariably sold out within a few years when they discovered life as a member of the ‘landed gentry’ didn’t mean instant rivers of cash flowed in, as they had presumed. These types of owners usually contributed little or nothing to the long-term building up (development) of the property they had a stake in – they just helped to keep the land price higher; out of reach of someone who otherwise would have bought and built a solid food & export income producing business for the benefit of future generations. Unfortunately for Australian agriculture, cashed-up ‘landed gentry’ dreamers are still around.
Many of Australia’s largest cattle stations have been held by joint owners or companies since inception. Others have remained in family ownership for many decades or more than a century. However it is true that over the last couple of decades or so, increasing numbers of separately owned pastoral leases in northern Australia have moved from private, family ownership to company ownership. And many of these large companies have bought up neighbouring properties.
Why? There’s probably a range of contributing factors, but the most likely primary reason is the need for investments companies to find suitable investments to park the billions of compulsory superannuation money (which just got another boost from the federal government, from 9% to 12%). Food & fibre producing schemes, and rural land, must look like good solid investment prospects to fund advisors lurking in Collins, Pitt and Queen Streets (etc).
I’m not sure whether the amalgamation of singly viable pastoral leases was previously stopped by state lands departments whose responsibility it is to ensure that pastoral leasehold land is not just well looked after, but developed. But regardless of whether it ever was prevented, these pastoral lease amalgamations certainly don’t appear to be hindered in any way these days.
When a neighbouring pastoral lease is purchased and combined with an existing lease to be run as one operation, it is inevitable that the living facilities of one are either moved to the other lease’s homestead complex, or the buildings and other infrastructure (such as yards) are simply allowed to fall into such a state of disrepair that they would be uneconomic to renovate, should anyone with to do so in future, in order to settle back onto the lease permanently. In any case, amalgamated leases are usually on-sold together (unofficially, via a tender process, if not officially only purchasable as one), helping to move these much larger (and more expensive) conglomerated properties forever beyond the financial reach of any buyers apart from large companies.
A classic example is a station-born and raised mustering pilot with many years of experience, who had a sufficient deposit to buy a particular northern cattle station which he knew well. However the seller was a large, southern-based company who sold all properties to the one buyer (by tender). The new owner has amalgamated some of these properties, letting good station dwellings deteriorate and now employing only a tiny handful of caretaking staff, supplemented by very occasional contractors. (And the cattle are running amok, but that’s another story.) Whereas there could have been a family making a good go of it.
In some parts of Australia, long distances from closely settled areas and state capitals – i.e. in regions where soil is not very fertile and/or rainfall is unreliable (eg parts of north-western Victoria and south-western Queensland), soldier settlement blocks were carved out of large lease-holdings after the second world war, producing battler blocks often too small to make a decent living on, from day one. The amalgamation of 40,000 acre mulga blocks to create economically viable-sized properties can only be a good thing for all concerned. Properties too small to make a living for a family are pointless.
However large pastoral companies have very rarely invested in these marginal areas and they certainly haven’t in recent years. Pastoral investment companies buy up blue-chip properties in blue-chip areas – where stations and farms have always been, and remain, an economically viable size. These types of properties have often been successfully owned by family partnerships for more than a century.
It is puzzling why these amalgamations are allowed (and the on-selling these amalgamations as a whole – very often by tender rather than a public auction of each stand-alone lease separately), given that almost invariably the living quarters on the ‘lesser’ or less conveniently located lease are removed or left derelict – in breach of pastoral leaseholder legal obligations, I would have thought. This amalgamation might make sense if large investment companies stuck around in the bush in the long term, investing heavily in infrastructure, soil improvements etc. However history illustrates, with just a tiny number of exceptions, publicly-owned rural investment funds have a very limited lifespan. At a rough guess, it seems to take around 5 years (or less) for investors to wake up to the fact that their investment is big on sentimentality and romance and very short on reliable returns cash into their pockets. Family farmers know they’ll have to tolerate floods, droughts, fires, grasshopper plagues, rising costs and reducing sale prices – but urban investors don’t have their heart and soul invested in the business and are naturally not so tolerant.
The reality is that it’s not easy for anyone to make a long-term profit by farming in Australia. (In fact it’s hard to do anywhere – unless you’re relying on generous government subsidies or very low paid employees – i.e. you’re making money off the backs of others.) Well run large companies have economies of scale but the bigger the economy of scale, the bigger the company is, and the bigger the loss due to wastage, other inefficiencies and extra expenses that seem to expand inevitably with the expansion of any company. These extra costs and inefficiencies are avoided by family-farm operations, who often have the added advantages of flexible management and a conservative management style, tempered by an intimate knowledge of the seasons, soils etc of their particular location; plus relatively few staff issues. The biggest difficulties family farmers usually have are succession planning issues and capital raising for major expansions and improvements, and riding out the inevitable tough patches (lengthy droughts, in particular).
Unfortunately it remains the case that the best profit made by any family farmers or public agricultural investment companies is when land is sold and capital gains are realised – by selling on to another optimist.
A healthy Australian agricultural sector needs a balance of private and corporate ownership. Corporate owners can draw on the funds to pay for extensive asset upgrades that are difficult for family owners to pay for; large companies have the ability to ride out prolonged tough periods, such as extended droughts; and corporate owners these days fork out heavily for staff training and give huge numbers of school leavers an opportunity to enter the pastoral industry. But our food production is safest in the hands of those who love what they do, not those who value profit above all else.
The question remains – in the face of escalating rural land values, why do the various state lands departments allow the amalgamation of good quality, stand-alone rural holdings, when it is their responsibility to ensure pastoral leasehold land is well looked after? It is in all our interests to ensure that the whole Australian environment is looked after, and to ensure the future production of good quality food and valuable export income is secure.
Tags: Australian cattle stations, Pastoral companies, Conservation and the environment