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«David Alvis A 2008 Oxford Farming Conference / Nuffield Farming Scholarship Trust award Thanks and acknowledgements I would first and foremost like ...»

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There is potentially no shortage of private and institutional capital to fund such a venture and the combination of a more stable milk market and government underwritten energy tariffs should in theory increase the attractiveness to investors and the potential debt capacity of a large UK dairy business relative to a comparable American one. In the short to medium term however the higher perceived level of risk due to the lack of a proven UK business model will drive risk premiums up and acceptable levels of gearing down.

The UK banking system offers potentially more opportunities for this kind of venture than is the case in the US. Although large scale dairying is not uncommon, many US banks are relatively small regional businesses that do not have the balance sheet strength to support lending on the scale required to finance large dairy ventures.

The UK banking industry by contrast is dominated by large corporates with the resources, if not yet the will, to support such projects and expertise in structured finance that would potentially allow individual businesses to better match their financial structure to their specific business model.

Establishing a robust risk management framework for structured finance projects is a critical element of a success, however the nature of this business is such that, once a suitable model is identified it can be replicated relatively easily Agricultural banking in the UK is however an extremely conservative business, with requisite levels of security often far higher than would be sustainable in other industry sectors.

Optimal financing of large scale dairy businesses will require more innovative solutions from both borrowers and lenders than has traditionally been the case in UK Agriculture.

Ultimately however, the funding decision will often boil down to the perceived strength of the individual entrepreneur and how they articulate their vision and business case. Whether the funding is sought from banks, private investors or institutions, the same rule applies....Investors invest in people.

Final thoughts

My Nuffield experience was in many ways one of the most enjoyable two years of my life. I have had the privilege to visit some wonderful countries, gained experience of some outstanding businesses and to meet some equally outstanding people many of whom are now lifelong friends.

What I have seen and experienced has broadened my mind and extended my horizons with regard to what is possible. Whilst my report has been rather longer in the writing than many might have hoped for, the delay has allowed me to frame the experience of my travels within context of some significant global events and fundamental changes to the industry.

It is an experience for which I shall remain forever grateful David Alvis March 31st 2010.



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