Speech - Australian Grains Industry Conference - Value Over Volume - It's more than a grain of truth

AUSTRALIAN GRAINS INDUSTRY CONFERENCE
MELBOURNE
THURSDAY, 2 AUGUST 2018

***CHECK AGAINST DELIVERY***

Introduction

I thank the organisations most responsible for the success of this, the annual conference – Grain Traders Australia, Pulse Australia and the Australian Oilseeds Federation.

At the risk of understating the value of others, I particularly acknowledge the role of GTA.

I’m fond of making the point; no sector can be sustainably profitable and internationally competitive unless every link in the supply chain is as efficient as it can possibly be.

Whether you are a grower, researcher, trader or a port service provider, the work of GTA is important to you.

Full marks also go to the sponsors without whom the Conference could not proceed. I thank all of them.

I know I’ve said it before, but I’ll ask you to briefly indulge me while I say it again; this Conference was my first outing as Agriculture Minister back in July 2013 so it holds both historical and contemporary significance for me.

I can state from experience, being here would have done David Littleproud the world of good.  I trust we’ll see him on the ABC’s QandA on Monday night.

In introducing myself to you back in 2013, I declared myself a believer in the market and I remain so.

I also said I’m wedded to evidence-based policy and believe in government guidance and intervention where market failure is holding our economy back.  In the spirit of Keynes, I still hold those views.

Given it’s an anniversary of sorts for me, last night I was reflecting on the last five years and found myself asking what’s changed and what have we achieved.

Turnbull Government’s Record

Five years on, 8 points of Government action or inaction stand out.

1.  A number of FTAs have been concluded but we have unfinished business.  That’s an issue I’ll return to;

2.  We’ve had an agriculture white paper; I won’t be dwelling on that document today. I suspect most of you would have erased it from your memory banks in any case.  Of course I feel for those who have not been able to do so.

3.  We had an excellent Productivity Commission inquiry into the impacts of government regulation on the agriculture sector.  If you haven’t read it I recommend it, it’s a quality piece of work.  Sadly the Government has not responded to the PC’s report which is still gathering dust on the Prime Minister’s book shelf.  Or maybe Barnaby hid it from him?

4.  Making the regulatory burden worse not better, we’ve had the introduction of the Port Access Code which covers almost no one but imposes a regulatory burden on just about everyone;

5.  We’ve had changes to Foreign Investment Review Board thresholds which now send the message that we have one rule for certain investors and another rule for others.  It’s another matter I’ll return to;

6.  We’ve had the forced relocation of the Australian Pesticides & Veterinary Medicines Authority (the APVMA) and with it a collapse in the regulator’s workforce and all the associated disruption and productivity loss that goes with such a collapse;

7.  We’ve had lots of talk about drought, but no meaningful action; and finally;

8.  We’ve had plenty of talk about multi-peril crop insurance but again, no meaningful action.

But that’s the past, let’s look to the future.

We are all enthused and energised by the opportunities the grains industry and Australia’s agriculture sector more generally has at its feet.

But we’re also alert to the challenges:  climate; biosecurity; land management; distance; capital; innovation; barriers to trade; product market development; and new and emerging competition. 

On this last point, I note the theme of this year’s Conference and I welcome your focus.

Australian agriculture is at a crossroads.

We can stay on the current path to moderate success, or take the high-value road to more prosperous outcomes.

We can pin our hopes more and more on increasingly competitive commodity markets in which we are increasingly price-takers, or we can climb the value curve to something more rewarding.

Either way, the rewards won't come without hard work.  They won't come without new thinking and new attitudes.

They certainly won’t come if we don’t:

  • Think more about our natural resource use and allocation;
  • Secure greater levels of investment;
  • Lift our innovation effort; and
  • Establish meaningful responses to a more challenging climate.

Premium markets

I welcome the research GrainGrowers is undertaking on product quality and profitability.  It’s the right focus.

Australia’s key competitive advantage is our reputation as a provider of clean, green, safe, high quality, and ethically produced food. 

That’s why our biosecurity and traceability structures must be a first priority for government.

Whether it’s a healthier product, a higher protein product, a different coloured product, a uniquely tasty product, or just a product cleverly packaged and labelled; we need to chase the premiums both domestic consumers and overseas customers are showing an increasing willingness to pay.

That’s not to say volume won’t remain an important part of the equation.  Given you export around 70 per cent of your product, I don’t need to tell a grains industry gathering that.

But our production volumes are limited by the extent of our natural, labour and capital resources.  In the absence of significant technological change we can only increase profitability by volume so far.  We must strive towards lifting revenue per unit sold.

There is another point.  It’s also hard to imagine farm returns rising markedly in increasingly competitive global commodity markets.  And given the threats of trade wars, we need to ask ourselves; where is our insurance policy against the potential rise and rise of protectionism?

Now none of that is to say we can’t raise profitability in commodities production by lowering costs and raising productivity.  We can and we must.

Government certainly has a role to play:  by improving market access and guaranteeing appropriate levels of public investment in research, innovation, road, rail and telecommunications infrastructure.

On the market access front, and in the current environment, much more needs to be done.

Free Trade Agreements are a good thing and both the major political parties can take some credit for those most recently concluded.  And while we must keep working at them, they are no replacement for multilateral outcomes.

But we need also to keep in mind that no matter how level the playing field might be, we still need to be able to compete on that level playing field. 

Free Trade Agreements do not guarantee success.

To suggest otherwise would only seed complacency and complacency is death in any human endeavour.

Foreign Investment

It is also important for government to send the right signals to foreign investors.  Lifting farm productivity will require significant additional capital investment.

The 2012 ANZ Greener Pastures report suggests that to reach our aspirations in agriculture, Australia will need $600 billion of capital investment, and another $400 billion will be needed to support demographic driven farm turnover out to 2050.

To put this into perspective, that’s more than two and a half times recent annual levels of investment in agriculture.
With a population of only 25 million, we have a limited savings pool and, by necessity, much of the investment will come from foreign sources.

Our language, attitude, and rules must be clear, concise, consistent and non-discriminatory.  Our potential investors are watching and listening.

Playing to populist community concern about foreign direct investment is a zero sum game.  Everything we do and say as industry and political leaders must be designed to help our domestic audience understand why foreign investment, including Chinese investment, is so important.

Fiddling with Foreign Investment Review Board thresholds sends all the wrong signals to potential investors and to our own local communities alike.

Offending our largest trading partner with reckless language just to win votes at home doesn’t help either.

Climate Change and Drought

We live and work on the driest inhabited continent on the globe.  We have a limited and depleting stock of soil resources.

We cannot achieve our aspirations for Australia’s agriculture sector without a deeper and more meaningful focus on our natural resource base.

I am aware that GRDC and others are already doing a lot of good work in the natural resource management space.  GRDC’s extension efforts have been, and remain, substantial. 

I submit its on-the-ground education projects and its popular “GrowNotes” as exhibits A and B.

And we know we’re not completely failing in our push for greater sustainable profitability given grain and grains/sheep producers are holding more than $3 billion in Farm Management Deposit accounts and farmers generally hold more than $6 billion as at the end of the June Quarter.

But when we find ourselves transporting grains from the West of our continent to the East, watching livestock starve, and when producers are turning to welfare, we know there is a lot more to be done.


The climate is changing and becoming more challenging. 

Our natural resource base is shrinking.  Too many of our farm enterprises are moving from the marginal to the unviable column.

We must act with urgency.

In fact we must urgently do at least two things:

1)  We must renew the Intergovernmental Agreement on Drought Reform and restore a proper CoAG process.  In 2013, with the support of farm sector leadership and both Labor and the Coalition, the Commonwealth and the States signed an historic agreement to scrap all the old and unsuccessful drought relief programs and to develop a new approach based on 5 key objectives.

That Intergovernmental Agreement (IGA) expired last month.  It has not been revisited or renewed.

Indeed the CoAG body responsible for the IGA – the Standing Committee on Primary Industry (SCoPI) – was abolished by the now Turnbull Government not long after the 2013 election.  Barnaby Joyce said we didn’t need it.

The Commonwealth will only meet with success in progressing meaningful drought policy reform if it works collaboratively with the States.  They are, after all, the dominant players in land management matters.

That’s why the 5th objective of the 2013 IGA was so important.  It committed the parties to:

“Provide a framework for jurisdictions’ responses to needs during drought periods”.

We’ve seen little evidence in recent months that this objective has been pursued, let alone progressed.

2)  The first of the 5 key objectives takes me to the second matter of urgency: climate adaptation and best practice sustainable farming methods.

Objective (a) of the IGA says we need to:

“assist farm families and primary producers adapt to and prepare for the impacts of increased climate variability”.

Of course the first priority in progressing this objective is to follow, act upon and further build upon the science.

Best practice land management and farming methods has always been a key priority for me. 

The work of groups such as Farmers for Climate Change Action and individuals such as scientist and author Charles Massy, have further strengthened my resolve that Australia must adopt the best land management and farming methods to ensure the future sustainability of the sector.
 
Having acknowledged the good work our Rural Research and Development Corporations (RDCs) have done on the adaptation and extension fronts, today I announce that if elected, a Shorten Labor Government will ask them to form an Agricultural Climate Adaptation Partnership.
 
As Minister and together with the Minister for Climate Change, I will ask the Council of RDCs to lead the development of an Agricultural Climate Response Plan (ACRP) to dramatically increase the up-take of drought-adaptation farming methods.
 
The Agricultural Climate Response Plan will also consider other climate impacts such as severe frosts and increased levels of pests and diseases.
 
The Grains Research and Development Corporation, Meat Livestock Australia, Dairy Australia and each of the relevant RDCs will pursue voluntarily agreed benchmarks and milestones over an agreed timeframe, most likely over the period of a new 5 year Intergovernmental Agreement on Drought Reform (IGADR).
 
The Agricultural Climate Response Plan will not only build farm resilience, it will also drive productivity by maintaining yields in times of drier periods and reducing input costs such as energy and fertilisers.
 
Of course, the Response Plan will offer no immediate relief for drought affected farmers and Labor stands ready to support any meaningful and more immediate Government initiatives.
 
Collectively our agriculture based RDCs are recipients of around $600 million of taxpayers’ money annually.

I could think of no better use of taxpayers’ money than to have it invested in the ability of our farmers to remain productive in times of severe drought and other climate change weather events

Research & Development

Many of you will be aware that I believe we are due for a review of the structure and operations of our Research & Development Corporations.  Given I’d like them to tackle the adaptation task, it will be even more important to ensure they are operating as efficiently and as productively as is possible. 

The Agricultural Adaptation Response Plan need not distract them from their current research strategies and plans.

The review should not be seen as a threat but an opportunity.  It is now seven years since the Productivity Commission undertook a review of our RDCs.  Rightly or wrongly, its key recommendations were never adopted by government.  It’s time to take another look.

Conclusion

There is one more thing we need to do together.  The producers of our food and fibre are among the most respected in our community.

Yet more often than not, to find a good news story you have search the business section.  The media seems intent on only running the hardship stories which, even in times of severe drought, are only part of the agriculture picture.

Let’s collectively talk more about the success stories including those who are successfully managing drought. There are many of them, let’s celebrate their achievements.

Let’s celebrate agriculture’s achievement more generally.


Be the first to comment

Please check your e-mail for a link to activate your account.