To help growers who are thinking of increasing their production area, the National Australia Bank (NAB) has put together some tips on planning and risk management.

Australia’s protected cropping industry accounts for around one quarter of the total value of vegetable and flower production, worth some $1.3billion in farm-gate value per annum, according to Graeme Smith.

NAB senior agribusiness manager and specialist in protected horticulture cropping, Lloyd Neilson, says the industry has overtaken soil-based growing for many vegetables in parts of Europe and New Zealand, and there’s huge potential here in Australia.

“There are many benefits of controlled environment production, including the ability to achieve higher yields year ‘round, increased water use efficiency and greater control of pests and diseases.

“From a bank’s perspective, these things reduce many of the risks inherent to agriculture, so hydroponics can be seen in a favourable light.

“However, it’s also a very capital intensive industry. Therefore, it’s important to work closely with a finance partner who understands the industry,” Mr Neilson says.

The industry is forecasting that around $50 million will be invested in new infrastructure over the next 12 months (working on 25ha @ $200/m2).

Economies of scale can bring increased profits, but Mr Neilson says it can’t be the only factor considered by the many growers looking into the development of new growing areas, especially with a large component of the infrastructure needing to be imported.

Other factors include:

• Business planning. Don’t expand for the sake of it, but consider how it fits with your personal goals and succession plans.

Managing exchange rate risk. The Australian dollar has been volatile in recent months, and there is a long lead time between ordering materials and final payment upon delivery. Consider using forward foreign exchange contracts or negotiating payments in Australian dollars.