Embracing change: Growing a $100 billion agriculture sector

The National Farmers’ Federation has set a goal to grow the value of Australia’s agriculture sector from $60 billion to $100 billion by 2030.

It’s not a bad ambition to have.  But is it realistic?  I hope so. But it’s going to take a lot of hard work and require a lot of change.

We’re not off to a great start. According to the ABS, the sector contracted by 5 per cent in the December Quarter.

Of course, most of this contraction can be attributed to drought.  But given drought is likely to be a common feature of our future weather patterns, we can’t dismiss the December figure.

In any case we have other challenges.

Indeed, Australia’s agriculture sector has more challenges than any other I’ve been intimately involved in.

  • Its productivity has been flat-lining for a decade.
  • Eighty per cent of its output by value comes from just 20 per cent of its farms.
  • According to the ABS, 59 per cent of farm businesses have a turnover of less than $200,000 annually.
  • It is losing global market share.
  • Its natural resource base is in decline.
  • Droughts are coming more regularly, they’re lasting longer, and they are hotter.
  • Weather events more generally – storms, dust storms and floods – are becoming less predictable.
  • The sector can’t secure the workforce it needs, and the existing workforce is ageing.
  • Its performance on the innovation front is sub-optimal.
  • It has heavy exposure to the vagaries of global commodity markets.
  • Product development and production methods are falling behind consumer expectations and preferences.
  • The sector’s costs are high by international standards.
  • A traditional competitive advantage – our proximity to Asia – is being diminished by falling freight costs.
  • As a country of only 25 million potential savers, we don’t have the capital to overcome these challenges.

Now despite all of this, I do believe Australia’s agriculture sector can have a bright future.  Indeed, we need to guarantee it a future.

A hungrier world and a wealthier world provide many opportunities.

But we won’t fix our problems and overcome our challenges if we’re not willing to first acknowledge them.

To meet our aspirations, we need to be more honest with ourselves and be more open to change.  We must bring the whole sector into the 21st Century.

And we won’t do that without strong government guidance and strong partnerships between industry and government.

I submit there are four things we need to come to terms with if we are to reach the $100 billion aspiration.

  1. A changing climate and the state of our natural resource base.
  2. The need to diversify our product markets and to pursue premium prices.
  3. Changing community attitudes and consumer preferences.
  4. The state of our research and innovation effort.

Climate Change

Climate change action is emerging as a key election issue.

That should be good news for our farmers because no group is more adversely affected by our changing weather patterns.

Growing voter interest in climate change might just force Scott Morrison to take the growing impacts of climate change on our farmers more seriously.

Many farmers aren’t waiting for Government to act and are already adapting.  They are focusing on soil health to improve soil water retention and yield. They are embracing cell-grazing methods to avoid damage caused by overgrazing. They’re investing in productivity-lifting technology, on-farm feed storage facilities, and water efficiency projects. 

They are also finding new ways to fight pests and disease; saving money on chemicals; improving soil health; and making their product more appealing to consumers.

Some have switched crops or further diversified their operations.  Many have enlarged their farms by buying more land to secure greater economies of scale.

But too many growers and producers have done none or few of these things. It’s not necessarily because they are not open to climate adaptation. Rather, it’s more likely they’ve not had the capital needed to embrace it, or they’ve lacked access to the information they need to act. 

They are also time-poor, spending most of their time and energy just keeping the banks from the front gate.

This is a problem, not just for the obvious reason - none of us likes to see a farmer struggling for survival.

It’s also a problem because scarce land, water, soil, energy, capital and human resources are being allocated to activities providing no real returns; not for the farmer, not for the nation.

This is, in part, why productivity growth in the agriculture sector ran out of puff more than a decade ago.

Many of our growers and producers are working land which – due to climate change - is moving from the “marginal” column to the “unviable” column.

Sadly, some don’t have a future. Thankfully for many more, it’s not too late.  They just need a Government prepared to help them make the necessary adjustments.

If the Liberals and Nationals were serious about backing our food and fibre sectors, they would be joining with Labor in committing to meaningful carbon pollution reduction targets and a more urgent transformation of our farming sector; a broader embrace of innovation, better land management practices and lower production costs.

Labor’s climate change policy suite has all these objectives at its core.

On the mitigation front we’ll regulate to reduce carbon output in the electricity and industrial sectors with policies that are based on firm carbon reduction targets. But we won’t impose carbon reduction targets on the agriculture sector.

Importantly though, our farmers will be able to participate in the system by creating the carbon offsets our industrial polluters will need and earning the revenue those off-sets provide. They’ll do so by planting more trees, preserving more ground cover and increasing the carbon in their soils and through other measures.

This is a win-win for farmers; it will provide an additional revenue source and incentivise productivity-enhancing on-farm improvements to our natural resource base.  And it will provide the best defence to drought.

Labor will help our farmers embrace these opportunities by investing $40 million to develop new carbon off-set methodologies.

Our $400 million Farm Productivity & Sustainable Profitability Plan will also help farmers adapt and earn.

Unlike the Liberals and Nationals, who are out of touch with the agriculture sector, a Shorten Labor Government will work with Meat & Livestock Australia and the National Farmers’ Federation to help them achieve their self-imposed goal of having a carbon neutral agriculture sector by 2030.

Labor’s political opponents have tried to make much of our determination to rein-in conservative state governments that are attempting to wind back the clock on land clearing practices.

But we are proud that for the sake of our natural environment, our soil resources, and our farmers, a Shorten Labor Government will use the Commonwealth’s powers to intervene on weak, populist and counter-productive state native vegetation laws.  In Queensland, where native vegetation laws are robust and the LNP likes to lead the scare campaign, farmers will be unaffected by Labor’s policy. 

Promoting productivity growth and sustainable profitability is the main game for the agriculture sector and it will be a key focus for a Shorten Labor Government.

Premium Markets

For six years I’ve been talking about the need to focus more on product value and less on volume.  But the Coalition Government has shown zero interest in the subject.

Australia is the driest inhabited continent in the world.  Our soil resources will remain limited no matter how well we restore them to health.  It is critical that a share of those resources be allocated to areas of production which provide high returns:  premium, high quality and niche products.

Australia cannot afford to be too exposed to increasingly competitive commodity markets in which we are increasingly price takers.  Market access is important, but it doesn’t, and can’t, guarantee competitiveness.

We begin from a sound base. We boast some of the best and most innovative farmers in the world and our reputation as a provider of clean, green, safe and high quality food is well known. But we need to give our farmers more tools and further build on that reputation.

A large slice of our research effort must be directed towards product development.  Whether it’s a marbled wagyu containing relatively healthy fat or a piece of fruit with a unique colour or taste, we need to build a competitive edge.

Our branding effort needs work too.  The Kiwis make us look like amateurs.

Understanding the Customer

We’ve all become very familiar with the term “disruption”.  Most of the conversation about disruption has been focused on the impacts of technology: Uber and Airbnb are the obvious examples.  Technology will also impact on the agriculture sector but happily, in many positive ways.

But two other significant forms of disruption will continue to challenge us:  changing community attitudes and changing consumer preferences.

We should see these changes not just as a challenge, but as an opportunity.  We need to harness changing community attitudes and food preferences and turn them to our advantage.  Let us be in no doubt, consumer preferences will continue to evolve.

More and more, they’ll want our producers to respect the welfare of animals. They’ll also want our product produced in a sustainable and ethical way. 

So today I’m re-affirming Labor’s commitment to building public confidence in our farming and export systems by announcing our 6-point Animal Welfare Plan.  At the core of the plan is a commitment to more regulatory transparency, more regulatory accountability, better Commonwealth-State cooperation and greater stakeholder engagement. 

And to leave consumers in no doubt we will act when we see intractable animal cruelty, the 6-point plan also reaffirms our decision to phase-out the live sheep export trade.

We’ve already seen how turning a blind eye to systemic cruelty damages our reputation, fuels community concern, and allows a small few to make economic rents at the expense of those doing the right thing.

Consumers are also growing more health conscious and each day face waves of advice on what they should or should not be eating.  They are voting with their feet and will continue to do so in increasing numbers – both here and in export markets.

As a wealthy and innovative nation, Australia is well placed to give consumers what they want.  Just as our savvy fast-food retailers have responded to their changing consumer ask.

Research & Innovation

Research in the agriculture sector is shared by a range of entities: state governments; universities; the CSIRO; and Cooperative Research Centres.  

But the bulk of Commonwealth and industry investment is done through 15 Research and Development Corporations (RDCs). Some are statutory bodies, other have evolved into industry-owned companies.

Few Australians will know about our RDCs, in part because many have removed 'research' from their branding.  Dairy Australia, Meat & Livestock Australia, and AgriFutures are all RDCs. So too are the Grains RDC and the Fisheries RDC.

Between them the RDCs receive around $400 million in taxpayers’ money each year. This investment matches money the RDCs receive from their levy paying farmers, foresters and fishers. 

Most people will be surprised to learn the RDCs do not do research. Rather, their boards and CEOs set research priorities and contract out the work to other entities. The overheads and transaction costs associated with this process are significant.

The architecture has served both the agriculture sector and the government well for almost thirty years. It was the initiative of a Labor Government and we are proud of it. 

But it is now tired and in need of renewal. Our RDCs have grown bloated with non-research activities. They suffer silo syndrome: too little cross-sectoral research takes place. 

Too often they act more like industry leadership groups than research organisations. They tend to invest only to the level where the government’s matching funds dry up.

Their work in marketing is important but too often can be a distraction from the main game. Measuring their performance is a difficult task for even the most learned and time endowed.

Back in 2011 the former Labor Government came to the view it was time to re-visit the model.

The Productivity Commission was tasked with a review. It made significant recommendations about both the funding and operational models. 
 
Sadly, the 2013 election intervened before government could act. The report has been gathering dust ever since. It’s time to dust it off and update the PC’s good work.

Research dollars are scarce, and we need to ensure every cent invested is a cent well spent.  A Shorten Labor Government will build on the foundations laid by the Hawke Government by ensuring we have the best agricultural research system in the world and one which ensures we meet our aspirations.

The four points I’ve highlighted are critical to establishing a foundation from which to build.

But if we are to fully meet our aspirations, we’ll need to do much more to lift productivity and to build international competitiveness and sustainable profitability.

Many of these additional needs lie outside the agriculture portfolio. For example, we need better voice and data connectivity, on-going investment in key infrastructure projects, and a whole-of-government approach to our work-force shortage challenges.

Labor Governments have had a strong record of investment in this area in the past and we will invest again.

We’ll also need to help the electorate better understand our reliance on foreign direct investment and its benefits for our food and fibre sectors.

But resistance to change is our biggest enemy.  We have a choice to make, we can stay on the current path to moderate success or worse, or we can choose the smarter road to higher and sustainable agribusiness incomes.

If given the chance, a Shorten Labor Government will encourage the second option and provide the guidance the sector needs to secure that $100 billion number by 2030.
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