Victorian dairy giant, Murray Goulburn has said that they will be looking to international investors to support dairy farms in an effort to avoid the big banks.
The move would see the co-operative bypass traditional bank lending as the company has identified external foreign capital as a key funding strategy for struggling famers.
The co-operative recently launched the Murray Goulburn Partnerships program which is designed to attract offshore equity funds to purchase farm land, which will then be leased back to suppliers and shareholders, The Australian reports.
Murray Goulburn Co-operative general manager of shareholder relations Robert Poole, said that traditional methods of bank funding have remained unchanged for the past 50 years, are not sustainable for farmers.
"A lot of the banks are still funding agriculture like they did in the 1950s and 60s, with 50 per cent equity and mums and dads borrowing money," said Poole.
"That is, I think, going to rapidly change and I think the banks are going to be involved in that or they are not. Because the external capital is inevitably going to come.
"Overseas investors are taking a more positive long-term view of agriculture than what a lot of local banks and superfunds are."
Industry experts have said that the banks have become increasingly more ‘nervous’ when it comes to ethical obligations in the agricultural sector, however Elder’s Australian network group manager David Goodfellow, says that banks have been making ‘very sensible decisions’ when it comes to agricultural funding.
"There is every reason there could have been panic and mayhem in the north," he said.
"But generally the response from the banks has been mature and orderly. It could have got completely out of control. I genuinely take my hat off to the banks for their behaviour through these times."
Robert Poole acknowledges that banks may have reservations when it comes to agricultural funding, however he syays that they should still support the sector where possible.
"We've had some large dairy farms go into administration this year. We understand that sometimes happens," said Poole.”But we would encourage the banks to be careful, act early, support the farmers absolutely where they can."
According to Poole, the co-operative has sold a dozen dairy farms to a European superannuation fund under MG Partnerships program.
"We use our status to bring external funding into the sector, farmers bring projects to us where they want to buy a farm next door through equity rather than debt. And we marry that up — we sit as a corporate counter-party in the middle," he said.
"We have strong interest at the moment from offshore. The sector is looking good. The Australian funds are starting to look at it too, now."