What we’re hearing:
The businesses enabling agriculture are facing their own transition
Pre-farm gate businesses sit upstream of production – supplying the products, technology, services and infrastructure that agriculture depends on to function.
These businesses are increasingly operating against a backdrop of global supply chain disruption, innovation pressure, funding uncertainty, weather-related demand patterns, and rising customer expectations around reliability and continuity.
At the same time, many are being asked to help solve some of agriculture’s biggest challenges, from drought resilience and emissions reduction to labour shortages and productivity pressures.
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Larissa Lai
“Innovation is playing a major role across pre-farm gate activities right now. Whether it involves new seed genetics, advanced fertilisers and pesticides, machinery components, on-farm automation, vehicle electrification or other emerging technologies, innovative pre-farm gate businesses should be aware of the tax and grant incentives available to support them.”
Global disruption is influencing supply risk
Pre-farm gate businesses remain highly exposed to global supply chains, particularly around fertiliser, fuel, petrochemicals and plastics.
Many fertiliser products and packaging inputs rely heavily on international supply networks linked to petrochemical markets and energy pricing. That exposure has become more pronounced during recent periods of geopolitical instability and freight disruption.
The severity of these disruptions has even led some suppliers to consider invoking force majeure clauses in their supply contracts. However, this does carry significant legal and commercial risk.
Legal commentary around force majeure has reinforced that rising costs alone may not be sufficient justification to terminate contractual obligations, unless there is a legal or physical impossibility of performance.
This creates a difficult balancing act for suppliers who are attempting to weigh:
- shareholder pressure
- reputational risk
- customer relationships
- legal exposure
- supply continuity
The knock-on effects can quickly flow through to the wider sector. Where fertiliser, machinery or input supply is uncertain, farmers are more likely to delay purchasing and investments – which loops back into hesitation across upstream agribusiness activity.
Innovation is taking center stage
Innovation has always been part of agriculture, but businesses across the pre-farm gate sector are progressively being forced to innovate faster.
Seed genetics is a clear example of this trend. There is growing demand for crop varieties offering drought and disease resistance, heat tolerance, improved yield stability, and stronger performance in harsher environments to help producers more easily manage highly variable climate conditions.
Innovation in fertilisers is also becoming more important as growers look for:
- lower cost alternatives
- more efficient nutrient delivery
- reduced emissions intensity
- greater resilience against global supply disruption
These types of projects often qualify under the government’s R&D tax incentive program, which has become a major source of support for innovative agribusinesses developing new products and technologies. The Federal Government’s Strategic Examination of Research and Development – known as the Ambitious Australia report – also highlighted the importance of improving commercialisation pathways and innovation investment across the economy.
While innovation is front of mind, businesses in the sector are experiencing greater competition for government grant funding and more complexity around funding eligibility and assessment processes.
For smaller and particularly rural pre-farm gate players, awareness of the R&D tax incentive can also be limited. Business owners do not always recognise parts of their own innovation as eligible R&D activity, or know how to access specialist advisory support. As a result, many miss out on generous incentives that could help support further investment and improve cashflow.
Grants are more closely tied to broader economic outcomes
Pre-farm gate businesses that can clearly align with grant objectives, demonstrate strong project merit, and differentiate themselves from competing applicants are likely to be best positioned for success.
A recurring theme emerging across the pre-farm gate sector is that government funding is increasingly aimed at businesses capable of supporting broader economic or strategic objectives.
This includes projects linked to:
- advanced manufacturing
- emissions reduction
- energy transition
- regional development
- productivity improvement
- food security
Programs administered through organisations such as the Australian Renewable Energy Agency are heavily geared towards such projects, with funding typically structured around co-investment, defined project outcomes, commercial scalability, and economic impact.
One notable downside from the latest Federal Budget is the reduction in funding towards agricultural innovation. Uncommitted funds from several grant programs are set to be redirected elsewhere, with the Future Drought Fund facing the largest reduction moving forward. Further funding cuts will affect a range of grant programs and other trade and innovation initiatives, totalling $104.6m. This means future grant rounds are likely to be fewer, smaller and more competitive, with tighter eligibility criteria.
Edward Day
“A lot of businesses still approach grants thinking about what support they need, but the real question is: what outcomes does the project deliver more broadly? How can I align what I am doing with what the government is looking to accomplish, and then clearly communicate that in a grant submission?”
Agritech investment continues despite tighter capital markets
Access to capital has become more difficult across parts of the agritech and innovation ecosystem, particularly for early-stage businesses.
Investors and lenders are placing greater emphasis on:
- staged growth
- scalability
- operational modelling
- capital efficiency
- pathway-to-profitability
This is increasing demand for stronger forecasting, modelling and commercial planning capability in early-stage agribusinesses.
Similar to government grant funding, the most significant investment activity continues to centre around technologies that align with industry and national priorities. A timely example is a pre-revenue livestock feedlot business commercialising methane-reduction feed technology originally developed by the CSIRO’s FutureFeed program.
FutureFeed’s seaweed-based feed additive has demonstrated the potential to significantly reduce methane emissions from cattle under controlled feeding conditions. This project gained strong support and investment from both the public and private sectors.
Resilience planning is becoming more important upstream
Supply chain resilience and climate-related disruption are becoming larger considerations for pre-farm gate businesses.
Companies relying on imported goods, raw materials or overseas suppliers are paying closer attention to:
- geographic concentration risk
- alternate supply options
- supplier dependency
- climate disruption exposure
Insurance providers and financiers are also assessing resilience and continuity planning more closely – especially where businesses depend heavily on single-source supply chains or vulnerable regions. Resilience is being assessed not only at a business level, but across an entity’s entire operating ecosystem.
Technology and data visibility are gaining importance
As pre-farm gate businesses respond to increased volatility and uncertainty, stronger business oversight and decision making capability is perhaps more critical than ever before.
Many operators still manage finance, inventory, procurement, shipping and reporting across disconnected systems and manual processes. Increased adoption of enterprise resource planning (ERP) systems and integrated reporting platforms is allowing businesses to better address these challenges by improving:
- inventory management
- purchasing and procurement
- financial reporting
- business planning
- customer response times
Consolidating systems can also help reduce cyber risk by limiting the number of disconnected platforms businesses rely on. As attacks continue increasing across all sectors, pre-farm gate businesses need to prioritise appropriate cyber controls – from access management and staff training to software updates, backups, multi-factor authentication, and endpoint protection.
Outlook
Pre-farm gate businesses are more important than ever to supporting the long term resilience and productivity of the agricultural industry.
As farmers face pressure around labour, climate variability, input costs and sustainability expectations, upstream businesses are being asked to deliver the technologies and innovations capable of improving outcomes across the board.
Simultaneously, these businesses are navigating their own considerable challenges around supply chain volatility, rising input costs, capital access, and commercialisation pressure.
The businesses likely to perform best in coming years will be those capable of combining innovation with operational discipline, while aligning closely with the broader priorities influencing Australian agriculture.
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