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AACL keen to shake off past

Haidee VandenbergheCountryman

International investment and buying farmland are part of AACL’s future, as the corporate cropper unveils both a new model and direction.

The company, which uses a co-production model to underwrite farmers’ cropping costs for a share of the profits, faced successive challenges last season, as poor conditions, the withdrawal of funding support from CBH and a growing scepticism of managed investment schemes (MIS) aligned.

The company recently posted a pre-tax loss of $1.88 million for the half up until December 31.

Under the old co-production model, farmers received their seeding payment in two parts — in early May and then once crops were planted. A production target was set and growers kept all of what was achieved above that.

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However, according to AACL executive officer Peter McEwen, that left AACL and outside investors carrying all of the downside risk.

Under the new model, target values will be set lower and investors will slice off a 10 per cent share of whatever is produced above target, although that figure is still being looked at.

“In essence, under the new model farmers will get paid more money up front,” Mr McEwen said.

“One of the big benefits of the product is that they can have a large component of their variable costs paid for non-recourse.”

But he admitted the new structure of the product would primarily make it more attractive for investors.

“Agriculture needs capital. We need to attract investment, so we have to provide a return for investors,” Mr McEwen said.

“Consequently, there needed to be those model changes, so it makes it more attractive for investors.”

Mr McEwen said the success of the new model would be measured by its uptake.

He was confident the $57 million put up by Glencore for the coming season would be fully subscribed.

“With the contracts that have been done and the expressions of interest that we’ve already had, we’re already approaching 50 per cent of our capital that we had,” he said.

“In terms of raw dollars, we’re approaching $27 million out of the $57 million we have got available.”

That equates to about 164,000 hectares of crop across the nation, with AACL aiming for 350,000ha.

Mr McEwen admitted the company would like to regain the industry’s trust, after what could only be described as a tumultuous year.

However, as AACL prepares to roll out an MIS project in April, Mr McEwen believes the market is ready to move on from the spectacular collapse of other schemes such as the Rewards Group and Great Southern.

“The sector has been tarred and, operating in that space, there has to be some flow-on effect,” he said.

“In 2008, $36 million was put into our project. Last year, it was $2 million.

“Since then, a lot of schemes have disappeared. People are looking for vehicles like that, so we believe there’s a very good upside for our model.”

Weighing in its favour of achieving the $10 million target for MIS investment was the recent sign-off by the Australian Taxation Office allowing AACL’s project to be used as a tax write-off.

It is hoped another $15 million will be raised from wholesale.

International funding is also on the cards, with the company targeting Middle Eastern and Chinese investors in addition to US and UK pension funds.

“That’s a real key area of focus for us,” Mr McEwen said. “We are about to release a third security model and we are talking to interested parties about that.”

Discussions were said to be “advanced” on a land fund model, which would see AACL buy cropping land in both WA and the eastern states.

“It’s unlikely for this year, but the plan is there and as soon as we’ve signed up capital, we’ll roll that out,” Mr McEwen said.

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