The Potential for Innovative Farm Business Structures in the Australian Grains Sector

Abstract

Many Australian grain growers face increasing capital, management and scale constraints that limit their ability to adopt productivity-enhancing technical innovations. Organisational innovations in farm business models, such as joint ventures (JVs) may offer opportunities to overcome these constraints and provide new pathways for owner-operator family farms to boost productivity. JVs retain the strengths of family farm models while capturing some of the benefits offered by largescale corporate farm businesses. Using a mixed-methods approach, this research addresses gaps in current knowledge regarding the potential of organisational innovations for Australian farmers. Data collected from interviews with agribusiness personnel, as well as two surveys of Australian grain growers, are used to investigate interest in and motivations towards adopting organisational innovations. A desktop review of the literature and semi-structured interviews with farm managers identified two broad groups of innovative business models: 1) hub-based models and 2) contracting models. Advantages of these models include: efficient scale of farm operations; better access to financial capital; stronger governance and due diligence processes; and increased human capital through labour specialisation. Analysis of data from a telephone survey of Australian grain growers revealed that 3% of rainfed grain producers were already in a form of JV, and 35% of producers had an interest in hybrid farm structures to help reduce farm costs, increase profitability, improve labour efficiency and capture economies of scale. Adopters of JV structures were significantly more likely to have larger scale operations; higher cropping intensity; less diverse sources of farm income; agronomists assisting with cropping decisions; and were less reliant on contractors for farm operations. Multinomial logit regressions revealed that famers interested in adopting a JV structure were more likely to be younger, hold a university degree, and believe their business is constrained by a lack of skilled labour. The analyses of discrete choice data showed that farmers prefer JV farm structures that offer increased income with minimal loss of decision control and no change to annual leave. Significant unobserved heterogeneity of farmer JV attribute preferences was identified using random parameter logit modelling and latent class analysis. Six classes of farmers, each with distinct preferences for JV structure attributes suggest that, although there is no ‘one size fits all’ model, there are opportunities for compatible JV partnerships. Our findings suggest that there is significant interest in adoption of JV structures, but adoption will require the identification of potential partners based on attitudinal, business and geographical compatibility. Policy interventions to assist in JV development should focus on: a) supporting research and extension to demonstrate the potential financial benefits; b) providing an enabling business, communication and investment environment to attract compatible farmers, investors, and partners; and c) building a network of trusted advisors to advise and support clients on JV formation and performance. By building the awareness and capacity of the advisor network towards organisational innovation, motivated farmers can be supported to find suitable partners and develop successful JV structures.