2. Agricultural Futures
• World food demand to double by 2050: FAO,
UN, CSIRO, ABARES
• Using less land, water, fuel, fertiliser
• Strong ‘ethical’ emphasis
John Hine and Associates
3. Agricultural Futures
• Ethical?
• Environment, water, soils, animal welfare, organics,
food miles, carbon neutral, child labour etc
• Starbucks – Fairtrade coffee plus a social premium
• Lipton tea packet;
– Rainforest Alliance Certified production
– Workers welfare
– Primary school for workers children
NO GREENWASH!
John Hine and Associates
4. Agricultural Futures
• Can Australia meet the challenge for more
food production, and make money out of it?
• Regional Australia needs to make more
money!
• NOT THE WAY WE ARE GOING!!
John Hine and Associates
5. Agricultural Futures
• What’s wrong with what we do now!
• Nearly everything! We are going backwards.
• Exports are falling and imports are rising
• Inwards investment is rising
• Overseas investment is limited
John Hine and Associates
6. Agricultural Futures
Who says we are getting it wrong? The data!
– Production growth of only 0.3% pa since 1970
– Productivity growth has slowed since 1992
– Food imports have doubled since 2000
– Net food exports have halved since 2000
– We are a net importer of F & V, for 2009/10
imports were $1.687B, exports $1.153B.
John Hine and Associates
7. Agricultural Futures
Lost opportunities;
– Dairy processing owned by Japan, Italy and NZ
– Meat processing owned by Brazil and Japan
– F&V processing owned by USA and Canada
– Grains owned by UK and USA
– Sugar owned by Singapore, Belgium and who else
– Cotton processing is owned by Singapore
– Rice owned by Spain
John Hine and Associates
8. Agricultural Futures
• Why did we get it so wrong?
• COMPLACENCY!
• We stopped trying so hard while others
started trying harder. What worked 25 years
ago doesn’t work now.
John Hine and Associates
9. Agricultural Futures
What are the issues?
– Too many independent small farms. 80% of farms
produce a third of output.
– A commodity focus, volume not value
– Commodities, not products for specific markets
– Over capitalised farms
– Small scale production
– Not using the latest technology
– Science, not market driven, R&D
John Hine and Associates
10. Agricultural Futures
There are still opportunities!
• Danish Crown exports pork to Australia, from Denmark
• JBS Swift has invested here
• Terra Firma has invested here
• Wilmar International invested here
• Olam International has invested here
• Deutche bank has an agricultural investment portfolio
• Where are our investments??
John Hine and Associates
11. Agricultural Futures
Why are we not investing in ourselves?
• farmers wont work together
• limited use of technology
• commodity focus, not a product focus
• low rate of return, about 1%
That is, not business like enough.
John Hine and Associates
12. Agricultural Futures
But what about:
• Food miles, just another niche opportunity
• Organics, another niche opportunity as not
possible for volume production
• Farmers markets, another good niche market for
high value products.
There is no alternative to large scale sustainable
commercial farming!
John Hine and Associates
13. Agricultural Futures
What about all those environmental pressures!
What about vegetation management, Wild
Rivers, protecting the Barrier Reef, cutting
water entitlements, animal welfare?
Well, you can have your cake and eat it too!!
John Hine and Associates
14. Agricultural Futures
Using sound scientific and economic analysis will
give sustainable, profitable farming.
Especially if linked with a focus on what you can
sell not what you produce.
Huh?
John Hine and Associates
15. Agricultural Futures
Take the grains industry. They are into precision
agriculture, with controlled traffic farming and
minimum tillage.
This allows them to use less fertiliser, less fuel,
less wear and tear on machinery, less labour
and less soil erosion. AND with better yields!
John Hine and Associates
16. Agricultural Futures
That’s the production end. More product with
lower costs and green production systems.
Sounds good.
What about selling the product?
Now that single desks have gone, that’s possible.
Says who?
John Hine and Associates
17. Agricultural Futures
JK International, that’s who.
A Brisbane based company that started in 1979
exporting legumes and now has eight offices
overseas in India and North America and also
deals in wheat, barley and sugar.
What’s their link with Qld agriculture?
John Hine and Associates
18. Agricultural Futures
What are possible ways forward?
• explore options for more scientific agriculture
• do local R&D on local problems, eg Birchip
Cropping Group
• explore options for wider business links
That is, reduce costs, increase yields, increase
income, and be greener!
John Hine and Associates
19. Agricultural Futures
Wider business links for farmers?
• New generation cooperatives?
• Take equity in marketing or processing
operations?
• New marketing groups?
John Hine and Associates
20. Agricultural Futures
What is the future for agriculture with growing
demand and increasing ethical pressures?
• Apply good R&D
• Do your own R&D if necessary
• Sell products not commodities
Or, let the corporates own it all.
John Hine and Associates
Editor's Notes
This talk is based on the premise that there are a wide range of changes moving through agriculture internationally and that Australia needs new ways of tackling these issues. More of the same won’t work.
All the ‘experts’ forecast a major growth in food demand, at a time when there is increasing urban encroachment, desertification, soil erosion and water pollution and when fuel and fertiliser costs are spiralling. Is ‘peak phosphorus’ a real issue? Water is an issue internationally. One CSIRO forecaster suggests that future wars will be over water. At the same time, consumers in developed nations are increasingly concerned over the issue of safe food produced ethically; that is looking after the land and waterways, not exploiting workers, no child labour and an increasing emphasis on animal welfare.
If anyone thinks they can avoid these issues, think again. When Starbucks has as the first page on their website that they use 100% FairtradeExpresso Coffee, paying a guaranteed price for coffee with a social premium for projects, its real. And look at what Lipton tea packets say! And, as a Vice President of Nestle said at the AIFST conference in Brisbane two years ago, no more greenwash! If you say it, it must be real, no fudging.
There would appear to be a major area of opportunity for Australia to sella lot more food, if can produce it at the right price. Many areas of regional Australia desperately need to earn more money. There are too many rural towns in decline and too much social stress in the farm community. Is this a golden opportunity? Yes it is, but it is suggested that the evidence is that if we keep going as we do now, we wont be able to produce the food and if we do we wont make that much more money from it. I may be wrong but it seems to me we are going backwards. A key is that farmers and food processors need to do it for themselves, not rely on government. Debate with me!
The premise of this paper is that we have got much of it wrong in agriculture. We are losing our main assets to overseas investors. We are not investing overseas. Why would we want to do that? Answer: to make money, by taking our knowledge and applying it in lower cost regions.
The statistics show we are getting it wrong. Food imports have doubled, from $5B to $10B since 2000, Net food exports, the difference between exports and imports, has halved since 2000, from $27B to $14B. Fruit and veg exports are slowing and imports rising. I have seen kiwi fruit from Italy in the supermarkets! So, we are going backwards. Australia has more or less lost its competitiveness in shelf stable food products. There is now so little canning here we stopped making tin plate some years ago. Is it that bad? Yes, and no. Yes, we have lost much of our local ownership but others seem to think we are worth investing in.
However, others seem to think we are worth investing in. The majority of our food processing is now foreign owned. Now that we have lost much of our competitiveness in shelf stable foods, ie canned, dried and frozen foods, and as these operations move off shore, we have no share in those offshore operations. Thus, everyone loses out. We should; have been investing overseas years ago.
We were probably the worlds best farmers 25 years ago, no longer. Others have passed us by. Brazil is as good or better than us in sugar production and is closing the gap with beef. New investment in food processing is going elsewhere, not here. Europe is now importing much of its vegetables from Africa and Eastern Europe, not here. We need a re-think of our whole approach to not fall even further behind.
Small farms with a commodity focus tend to spend too much on capital, as they don’t share equipment, and produce commodities, bulk products with a lower value. They also tend to focus on price per tonne, not total farm income. If you are into commodities, you have to be big and very efficient. If you focus on a value product for a target market, you can be smaller, as your products will have a higher value. Even then, farmers may have to work together more. Government decries the low take-up of R&D. But, perhaps our science focussed R&D system is doing the wrong R&D. Market driven R&D may be the answer. A classic case is our sugar industry, which had a policy of only selling raw sugar. It left all the value adding to others. Yes, that value adding may have had to be done overseas but we could have owned a share. What value adding? Not only various forms of sugar eg caster sugar but lactic and citric acids and xanthan gum for the food industry, amino acids as food additives, vitamins and antibiotics. All produced from sugar! We chose to do none of these.
It can be done in advanced countries, Danish Crown pork is used to make some 50% of the bacon eaten in Australia. Companies seem to be keen on investing here, eg JBS Swift, the Brazilian beef company went out of its way to invest in beef processing here, Terra Firma Capital Partners has bought Consolidated Pastoral, with 5.7M hectares and 350,000 cattle to focus on opportunities in Asia, Wilmar International, Asia’s biggest agribusiness group, with operations in 20 countries, has bought CSR Sugar, Olam International another major Singapore agribusiness company, bought Qld Cotton. Deutche Bank, a major European bank, has established an agribusiness investment portfolio to look for long term investments in the food industry. Why are we not investing in ourselves when other are?
Basically, Australian agriculture is seen as too hard. Profits are low and children are not wanting to take over the family farm. Too many farmers seem to be in it for the lifestyle, wont take a long term view and won’t sign long term supply contracts that give processors security of supply. Too many farmers have a short term not a long term focus and focus on what they produce not what they might be able to sell.
Re food miles, if anyone thinks that it is possible to feed a city of millions of people from anarea within a 200 km radius circle they are kidding themselves. Organics may not be the alternative as without ways of replacing nutrients lost by cropping, they are just mining the soil. Farmers markets are fine for some, if they are close enough to a larger town and produce a speciality product. Yes, farmers markets are growing but it is suggested they will always be a niche market. Therefore, it is suggested that there is no real alternative to large scale sustainable commercial farming, with an emphasis on sustainable.
Farmers are concerned about increasing pressures from all sides to be cleaner and greener, with all kinds of pressures from all kinds of groups. Yes, some of these groups have what almost seems to be an extremist agenda. However, there is widespread and genuine concern about ‘ethical’ issues across the whole community and this is growing. Its unavoidable. Why do you think so many voted Green at the last Federal election? Concern that neither side of politics seemed to want to do anything about it. Why do you think that Coles now promotes that it only sells beef without hormones? Why does Starbucks stress it sells Fairtrade coffee, Cadbury talk about limiting the use of child labour in coco plantations etc. Why do some investment houses have ethical investment funds? It is going to get bigger not go away. How I then say you can have your cake and eat it too?
So, it would seem that it is possible to significantly reduce costs and increase yields and be green. But how do our farmers get out of the rut of producing commodities and selling them to others to create the real value. By focussing on what their customers want. By selling products not commodities. By setting up businesses that add value. And now that single desks have gone, they can form links with their customers and find out what they want and look at new ways of doing business with them.
JK International started small in Brisbane in 1979 and is now among the top 10 privately owned companies in Qld,the top 100 private companies in Australia and the top 100 Australian exporters. They sell our farm produce AND farm produce of North America. What’s their link with Qld agriculture? None! They came here from Fiji. How did they do this? By being businesslike. So, if these people can do it, why not Qld farmers.
The grains people have shown that using sound scientific principles they can cut costs, increase yields and be more environmentally friendly. Other farm groups are already going down this track. The trick is to do it faster. Yes, there are R&D Corporations for each sector and farmers need to work with them. But up to 50 different farm communities across Australia have set up local groups to do applied R&D on local problems. The Birchip Cropping Group in Victoria started in 1992 and now has 436 farm businesses as members and employs 19 staff. They do all kinds of research on how to run farms better, including how to be greener. Why can’t different regions do the same in Qld? What about wider business links? There are a range of options.
US farmers use new generation cooperatives for ethanol plants. These allow non-farmers to be investors. These outside investors often bring business skills as well. There are ways for farmers to take equity in marketing or processing operations by, for example, signing long term supply contracts. And don’t think that processing has to be only about food, consider the possibility of plant based raw materials for industrial chemicals. A oil prices rises linked with new ways to get at the cellulose in bagasse, straw, woody waste etc may lead to whole new fermentation industries. Google lignocellulosics or biomass and see. Supermarkets and processors want reliable supplies of specific raw materials, why cant farmers get together to do this rather than leave this business opportunity to others. This is what One Harvest and Carter and Spencer do.
So, in conclusion, if farmers apply sensible R&D to improve land management and drop production costs, or do their own R&D if they don’t like what the system is delivering, and form better business arrangements in working out what to produce and where to sell it, we look good to turn round agriculture, improve farm incomes and make our regions more viable.
