robbie commens - share farming and orchard leasing in the macadamia industry
DESCRIPTION
2014 Australian Macadamia Society 40th Anniversary Industry ConferenceTRANSCRIPT
Share Farming and Orchard Leasing in the Macadamia Industry
Prepared by: Robbie Commens
Australian Macadamia Society (AMS)
Leasing Orchards – recent RESULTS
68%
32%
Have growers asked you about orchard leasing?
YES
NO59%
41%
Have your growers (or you) undertaken any orchard leasing in the last 2 years?
Yes
No
The industry is TALKING about leasing orchards!
2014 AMS 40th Anniversary Industry Conference proudly presented by
Estimated area under lease• 525 hectares
– Across all production regions
• Dramatic increase recently
2014 AMS 40th Anniversary Industry Conference proudly presented by
Benefits for both parties
Manager • Access more land
• Scale of economies
• Utilise machinery
• Utilise skill and expertise
• Increase potential for profitability
• Full time macadamia orchard work
• RETURN ON INVESTMENT
Owner• Stay on farm
• Increase value of orchard
• Help next generation of growers
• Reduced labour inputs
• More spare time away from farm
• Package for potential investors
• RETURN ON INVESTMENT
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Why Lease instead of share farm?
• Started with Share farm idea
• Risks with share farming agreement – *Partnership risk
– Lease payment structure can be “open”
• Based on Grower Feedback and input -– Incorporated share farm styled payment structure
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How did we do it?
• Partnered with stakeholders (NSW sugar, RDA)
• Regional workshop
– Acquired grower inputand feedback
• *Share farm payment structure
• VERY strong interest(>200 attended)• Positive feedback
2014 AMS 40th Anniversary Industry Conference proudly presented by
HUGE amount of grower and industry input
How did we do it?
Economic Analysis / Viability*Lease agreement based on a share farm payment
structure
• Costs – Manager pays all input costs– Owner pays rates
• Split gross income
• Initially focused on split (70/30 ?)
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Production is the key to increase returns NOT split to owner/manager
• Both parties should have a vested interest in increasing production
As production increases so too should the split to
both partiesSplit based on 5 year average production
0%10%
20% 25% 25% 25% 30% 35%
100%90%
80% 75% 75% 75% 70% 65%
0-1t/ha 1-2t/ha 2-2.5t/ha 2.5-3t/ha 3-4t/ha 4-5t/ha 5-6t/ha > 6t/ha
Owner Manager
This sliding scale has been well received, and has helped growers to not focus purely on the “split”.
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Return on Investment is directly linked to production
• As production increases
– Manager income increases
– Manager can afford to pay owner more income
– Owner income increases
0-1t/ha 1-2t/ha 2-2.5t/ha 2.5-3t/ha 3-4t/ha 4-5t/ha 5-6t/ha > 6t/ha
Return to Owner under share farming $- $195.00 $585.00 $1,072.50 $1,820.00 $2,925.00 $4,290.00 $5,915.00
NET Return to manager $(4,550.00) $(2,145.00) $(585.00) $227.50 $1,430.00 $2,925.00 $4,160.00 $5,135.00
$(6,000.00)
$(4,000.00)
$(2,000.00)
$-
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
Owner Manager
LOSS!
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Macadamia specific lease agreement
• AMS invested in a Mac specific lease agreement Contracts should;
• aid communication BEFORE the agreement starts• identify potential issues and solutions BEFORE they occur• help solve problems • collect dust in bottom draw
Contracts SHOULD NOT ;• prevent communication• be used as a weapon• create problems• be referred to regularly (monthly)
Available to AMS members at no cost
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Details of the agreement • Code of Practice
– To prevent orchards getting “mined”
– Independent Agronomic report
– Manager/tenant must agree to keep orchard at or above
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Details of the agreement
Termination
• Clause to state termination cannot occur in the first (INSERT NUMBER) of years from the start date
• Landlord (Owner) needs to give 12 months notice – Notice needs to be given in month of June
• Manager needs to give 6 months notice– Notice needs to be given between 1st Dec to 1st March
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Agreement can be altered
• Designed to save growers $$$$
• Clauses can be deleted or added
• Payment structure can change completely changed
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Key points
• Growers and Managers should ALWAYS Remember –
– Regional differences, orchard differences
– EACH AGREEMENT SHOULD BE NEGOTIATED & ADJUSTED CASE BY CASE
– Engage professional assistance
– *Formal agreements (not gentlemen agreements)
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Owner Case Study
• Greg and Liz Leggbagg
• Ewingsdale Orchard
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How can you progress this opportunity further?
• Register of Interest– Growers
• (spoilt for choice - >15 managers already registered)
– Managers
• Ask AMS staff for a copy of the agreement
• For further info talk, please contact me– Robbie Commens– 0488 432 226– [email protected]
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Thank you
• Albert Einstein defined insanity as –
“doing the same thing over and over again but expecting a different result”
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