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The Australia Agribusiness Update provides information about aspects of agribusiness that relate to the Australian agribusiness sector. Whilst Australia generally supports the notion of "Agribusiness without Borders" there are matters within Australia that can contribute to improving the overall industry, and therefore, its contribution to agribusiness globally.

 

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Predictions for Australian Agribusiness 2016

Posted By Roy Duncanson, Monday, 15 February 2016
Updated: Tuesday, 16 February 2016

 

Predictions for Australian

 

Agribusiness 2016

 

For Consumers:

Increased policy influence over food system

Food Prices Up

 

For Producers:

Producer Numbers Down

Profit Margins Remain Thin

 

Australia

 

Overall Summary

 

Australia continues to have no cogent agribusiness development policy; Commonwealth, State, or Territory. As a result the real value of largest single and sustained contributor to national productivity goes largely unrecognised by public policy makers. As a consequence, Australia will continue to understate and undervalue cogent policy treatment to the sector.

 

Australia does have a farming-centric approach to agricultural policy, and as a result do have the most efficient farmers in the world. Without addressing farmers supporting agribusinesses (roughly 10 times the size), farmers operating on thin margins will continue to experience supply cost pressures upstream and marketing pressures downstream.

 

Australian agribusiness is almost entirely domestically focused. There are no significant Australian agribusiness brands in the world today. That will continue without further policy treatment

 

Australia will continue to seek and sign multilateral and bi-lateral trade agreements, but the agribusiness industry itself will respond slowly to offshore business opportunities (due to the dominant domestic focus). Most industry development will be reliant upon by in-bound investment.

 

Examples of Australia’s larger farmers, fishers, and foresters responding to increased export demands by investing will remain weak. It will take a while before Australia’s sustained high cost structures cause shift from a reactive to a proactive pursuit of offshore trade opportunities. Further industry restructuring and innovation may be a prerequisite to that occurring.

 

In overview, whilst many of Australia’s farmers and fishers are export conscious, with few exceptions, their supporting agribusinesses are not. This is a major growth inhibitor for Australian exporters. The majority of existing Australian agribusiness companies will struggle to expand their markets beyond their existing ones.

 

Strong export demand in some sectors will hide underlying problems in the wider Australian agribusiness 'system'. Because of structural challenges facing media, both mass and rural media will publish success stories, but seldom focus attention on underlying structural issues.

 

With few exceptions, Australian agribusinesses will remain domestic market focussed and be attracted only to niche premium-markets servicing in offshore markets for the remainder of the decade. As a result, competition in the domestic market will intensify and most Australian-owned agribusinesses will struggle to maintain markets and profits.

 

Increased consolidation will occur in the farm input sector, and the industry will struggle with rising costs of accessing key trade-related infrastructure, mainly due to privatisation as a result of rising government asset sales programs.

 

 

What will increase?


  • Ag-industry representation fragmentation (4000+ grower groups and rising)

  • Chinese immigration seeking private ownership (people and capital)

  • Consolidation and takeover activities in the farm input sector

  • Consumer policy influence over food system

  • Cost of accessing key trade-related infrastructure

  • Domestic food processing company bankruptcies

  • Farmers markets (including non-genuine farmer markets)

  • Farm-gate costs

  • Food prices

  • Foreign investment and ownership of land and water resources

  • Free trade agreements (FTA)

  • Grower direct food sales

  • Internet speeds, mobile telephony, satellite usage (telephony coverage patchy)

  • Industry re-structuring will increase, albeit weak (i.e. commencing early stage consolidation)

  • Innovation, innovation infrastructure, and emphasis upon it

  • Land tenure debate, particularly in Northern Australia (new trend)

  • New entrants expand operations in the food retailing market

  • On-line food purchasing (fastest growing retail sector)

  • Organic farming (non-broad acre)

  • Private-sector R&D investment, weak then strengthening

  • The commencement and slow rise of pluralism will begin to challenge traditional representation/partisanship models as all peoples seek the ‘best of all worlds’

  • Traceability technology (and related trials of it)

  • Use of brands (particularly at the producer end)

  • Volume of carbohydrate foods (as a percentage of diets)

 

What will remain the same?


  • Absence of a drought policy for world's driest continent
  • Agribusiness lobbying activity by multi-nationals
  • Agricultural policies will remain largely unchanged (little interest outside the farm gate)
  • Bio-security provisions
  • City-based food production (struggling to move beyond demonstration concepts)
  • Rate of farmers and fishers exiting the industry
  • Food security (pockets of food insecurity will continue in Australia)
  • Obesity Rates
  • Red tape
  • Public perceptions about farming and agribusiness
  • Wholesale plant nurseries (slow to react to rising export opportunities)
  • The Australian Agricultural Competitiveness White Paper largely sees continuance of the status quo (i.e. no major changes)
  • The recommendations of the Senate Inquiry into Australia’s Agriculture Levy System will continue to be largely ignored (although patchy by commodity).
  • There will be no successful re-structures of any agribusiness sector industry representation groups, including the NFF due to status quo inertia

 

 

What will decrease?

 

  • Bank support for the sector (despite the rhetoric, internal bank risk ratings remain high, i.e. poor for farming)
  • Business confidence overall, including domestic agribusinesses
  • Commencement of declining food retailing profit performance by Australia-owned food retailers (particularly Colworths)
  • Drought support mechanisms (all jurisdictions)
  • Environmental Enforcement (various)
  • Farm bankruptcies
  • Farmer, fisher indebtedness (assume average season)
  • Aggregate farm-gate margins
  • Food based reality TV shows start slowly declining due to oversupply
  • Food Wastage, although patchy
  • Fuel Energy Costs
  • Support for public sector Ag R&D will continue to decline (jurisdictions will exit)
  • Government transparency and accountability
  • Hegemony will continue to drive the long-term decline of rural and regional groups (all jurisdictions), including political groups.
  • High protein foods (as a percentage of diets)
  • High value agricultural land
  • Investor confidence in Colworths oligopoly
  • Natural Resource Management and Landcare funding
  • Private foresters entering the industry
  • Public confidence in big-food (juxtaposed against rise of direct market forms)
  • Rural and regional journalism (as parent company retract to city media to contain costs)
  • Supply of ‘Ag industry-ready’ labour (all levels)
  • Wholesale food markets (slow decline continues)

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Australian Farmers are World Class, Australian Agribusinesses less so...?

Posted By Simon Abbott, Sunday, 2 November 2014

Roy's post highlights the fact that governments are not going to be the driver of change for the agribusiness sector. Governments calling inquiries and seeking submissions from industry is a covert agenda setting exercise giving the government the privilege of saying "NO".

Agribusiness must set its own agenda and put its money where its mouth is. Build the war chest and, like the Minerals Council of Australia, tell the government what it is going to do.

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Australian Farmers are World Class, Australian Agribusinesses less so...?

Posted By Roy Duncanson, Saturday, 1 November 2014
Updated: Sunday, 2 November 2014

Where is Australian agribusiness in the global scheme of things?   

 

Answer, about 1% or thereabouts....and struggling.

Broadly speaking, Australian farmers are the most productive in the world. Collectively they are ‘world class’. Whilst each individual farmer may not be thinking globally, as an industry they are. However, it is difficult to say the same for Australian agribusinesses collectively. Despite a few individual exceptions, Australian agribusiness are not thinking and acting globally.

Globally successful Australian agribusiness brands are hard to find.

The economic performance of Australia agribusiness has been dampened by the out-performance of the last Australian mining boom. This fact is recognised by the Productivity Commission with regard to its admission of the existence of economic condition called “Dutch Disease”. Whilst the Productivity Commission recognised the existence of “Dutch Disease”, it subsequently erred in not recommending an appropriate policy response.

In effect, the policy recommendation was ‘…do nothing’, and effectively, that dampened all subsequent efforts by the Australian Government to search for appropriate policy responses to address the adverse effects of the mining boom on the Australia Dollar, and thus to other major sector of the Australian economy such as agribusiness, tourism, education, and manufacturing.

Sadly, whilst the Productivity Commission acknowledged "Dutch Disease" enough recommending a policy response, it did not go on and do a further public service and provide a list of things a nation can do when faced with such economic conditions. In other words, what's in the tool kit that a country can use to cure the disease. Further, prevention is always better than cure, so what can be done to prevent it happening, if say, we move into a natural gas boom?

Lay economists will know that one plausible policy response would have been to develop a new national sovereign fund (similar to the Norwegian Sovereign Fund).

Sadly, the current Australian Sovereign Fund (the Future Fund) merely addresses past governance mistakes [being unfunded Commonwealth Public Sector Superannuation]. Australia does need a genuine national sovereign fund, and other measures anyway to help counter the continuing adverse effects of “Dutch Disease”.

The Agribusiness Council would propose a solution:

That Australia create a new national sovereign fund (along the lines of the Norwegian model) for two primary purposes:

1. To generate earnings to fund export-oriented agribusiness infrastructure (ports, road, rail, air, high speed broadband, and related logistics).

2. To exert a measure of desirable influence on the Australia Dollar for Australia’s export oriented industries, particularly for its largest manufacturing industry (being the food processing industry).

 

On the basis of simple, good national policy house-keeping, let's create one anyway? Even if we only put a million bucks in it a year, its a step in the right direction. Just start.

Let's put the challenge into context: the Australian food manufacturing industry was always about twice the size of its car industry, yet it received nowhere near the same level of government largesse in terms of industry support.

After the fact, we could argue that: 

  • Various government(s) industry supports to the Australian car industry were ultimately wasted (because there will shortly be none).
  • The industry support given to the car industry was wholly or partially the wrong type of support.
  • That little or no support to the food manufacturing industry was actually more effective (because it continues on).

The problem now, is that the Australia food processing sector is struggling (whether that is locally-owned companies or Australia subsidiaries of multinational companies). Thus, there is a reasonable case to turn public policy attention to the food manufacturing sector in two ways: (1) it actually gets some policy attention, and (2) the lessons learnt from the car industry not be repeated and other policy supports be brought into the mix and actioned.

The Agribusiness Council has long argued that a suitable target starting place would be $5 billion over ten years. Again, something is better than nothing.

If the Government won't initiate something more to support its largest manufacturing sector, then the agribusiness industry will.

Discuss....?

 

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