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agribusiness AS WE APPROACH THE END OF 2012, BALDEEP S. GILL LOOKS BACK WITH FONDNESS ON A YEAR IN WHICH DROUGHT WAS NO LONGER THE NUMBER-ONE ISSUE, AND FORECASTS THE WAY FORWARD. 2013 TRENDCASTER LESSONS FROM THE PAST While you reflect upon this year's more pleasant conditions, it's worth considering the following: • Did your business make the most of 2012? • Were your decisions too cautious or too ambitious? • What could you have done differently? As you plan for 2013, it's only natural and prudent to be influenced by past events. However, the challenge is to include only what is relevant and dismiss the spectres from the past that are unlikely to have an impact on you in the near future. GLOBAL PROJECTIONS Demand for food will continue to grow, unabated. We will continue to see population growth in Australia, with the Australian Bureau of Statistics forecasting longer life expectancy, more births and immigration taking the population upwards in the coming decades. The developing markets of Asia, the Middle East and Africa will continue to see population growth – one billion more people by 2050 – although some markets like Japan will stagnate. Overall, there will be significantly greater demand for produce. Production conditions at home are looking attractive. Water levels in most locations are good or excellent. For example, the Murray–Darling catchment is back to around 2001 water levels. Commodity prices continue to fluctuate but they are within a band that provides a positive outlook for cashflow projections. The strength of the Australian dollar is more of a problem, and this will continue to challenge exporters in the foreseeable future. GROWTH AND OPPORTUNITY Many farming businesses that struggled in recent years have been sold or are still on the market. However, there is another side to the story: a significant number of farming businesses are performing strongly and are well positioned for ongoing growth. One of the measures of strength in the agriculture industry is the level of farm management deposits. These have continued to grow and now stand at more than $3 billion. However, these funds are being held by fewer account holders. It seems a smaller number of successful farmers are generating sufficient excess cashflow to place into this effective risk management instrument. Will 2013 be the year for these successful operators to undertake further acquisition and consolidation? The price expectations of sellers are not always realistic. We've seen some high-profile transactions occur in 2012 that continue to feed expectations. However, the majority of 'average- sized' properties are starting to become viable from an acquisition perspective. Banks are also starting to look at agriculture with more favour. The flat credit appetite in housing and business has meant that banks are becoming more interested in the sector as it offers long-term security. EMULATING THE PAST If 2012 has been a year of strong performance for your business, you have every right to feel proud. The question to consider is what do you need to do in 2013 to feel even more pleased? Baldeep S. Gill is an independent financial consultant with 21 years of experience in financial services throughout Australia and the Asia-Pacific region. Email: baldeep.gill@theapcg.com 81