THERE are basically two types of farms in Australia now – those that are large, commercial and profitable, and those that rely on off-farm income to survive.
A look at some Australian Bureau of Statistics figures proves the point. Almost a quarter of all farms generate less than $22,500 from agricultural activities. About 55 per cent generate less than $100,000 and almost three-quarters less than $150,000.
While costs vary according to the type of farm and the season, they typically add up to 70-80pc of turnover. Clearly, therefore, a lot of farms are not making much profit.
When Australian Workers Union national secretary Paul Howes noted that “the day of ma and pa farming needs to end” and that “we need large-scale diversified companies operating in this sector”, he was roundly criticised.
And yet his key point, that government policy should not concern itself with non-viable farms, was exactly right.
Broadly speaking, if three-quarters of all farms were amalgamated into a third as many, Australian agriculture would take a giant leap forward in both output and productivity.
Policies that prop up small, inefficient farms and prevent this from occurring, and there are a number of them, are holding the industry back.
The process of amalgamation and rationalisation has been occurring for half a century. There are far fewer farmers now than 50 years ago and farms are on average a lot bigger. The problem is, it is not happening fast enough to facilitate productivity growth. That has been lagging for a decade or more, making us less competitive in the global market.
From the perspective of the viable grain growing sector, the argument used by Joe Hockey against the takeover of GrainCorp, that Archer Daniels Midland should not be permitted to have a monopoly on grain storage and handling on Australia’s east coast, was profoundly wrong.
Those growers have multiple choices including widespread use of on-farm storage and their own transport and marketing.
Most of the criticism of Howes came from those who reflexively disagree with anything a union leader says. If Howes had said the sky was blue, they would have argued it was a different colour.
But it also shows that our political leaders and influencers are in denial about what’s best for Australian agriculture. It is all well and good sympathising with the little guy, but not when it is reflected in government policy.
Prime Minister Tony Abbott, who originates from Warringah in Sydney’s northern beaches, probably didn’t know any better when he said Howes’ comment portrayed “a certain ignorance of the farm sector” and reflected “a lamentable contempt for family business and for family farming”.
Whether the “ma and pa” term is flattering or not, it reasonably reflects the nature of many non-viable farms. Typically, dad works on the farm while mum has a job in town, or dad has an off-farm job or does contracting to supplement farm income.
Further, Howes would probably agree with Abbott’s comment that “A lot of family farms are very sophisticated operations..” and “..more than capable of competing on good terms with much larger businesses.” Moreover, the vast majority of these are actually family owned companies.
The Minister for Agriculture and the Senator who regards himself the last word in everything agricultural have no excuses though.
Indeed, Barnaby Joyce and Bill Heffernan seriously lost it. Heffernan even tried his Sunday night phone call trick (something he has also done to me). Howes evidently hung up on him, for which he has my respect. (I “invited” Heffernan to hang up.)
Heffernan suggested Howes could not have made a bigger insult towards Australia’s hard working farmers than to call them “ma and pa farmers”. It was demeaning, he claimed, to suggest that ma and pa farmers should get out.
And, perhaps explaining why Howes hung up on him, he said he obviously doesn’t understand farming and hasn’t ever had a real job in his life as a trade union person.
Speaking of real jobs, Heffernan has been in the Senate since 1997. From 1981 to 1997 he was a local Councillor, twice serving as Council President. From that you might conclude he has not had a real job for a very long time himself.
It was similar with Barnaby Joyce. He described Howes’ comments as “pejorative”, “insulting, arrogant, out of touch and dangerous”. He suggested they show Howes discounts the rights of Australian families to make a living working on the land.
Like Heffernan, Joyce regularly suggests that his critics have never worked in agriculture and therefore do not understand it. The problem is, Joyce hasn’t worked in it since 1991 either. He was an accountant and banker for 14 years before entering parliament.
His accounting and banking clients were probably farmers, but that is nowhere near the same as being one. My accountant knows next to nothing about the agribusiness sector in which I have worked for 30 years, despite preparing my accounts for the last 15 of them.
Assuming Heffernan and Joyce are not silly enough to disagree with Howes without thinking about what they were saying, their comments show they do not understand that a lot of farms are based on lifestyle decisions.
While there is absolutely nothing wrong with keeping a farm going with the benefit of off farm income, spending taxpayers’ money to help them keep doing it is a different matter.
I would probably disagree with Howes on many aspects of industrial relations, but on the subject of farming I agree with him. Moreover, he may one day be a minister in a Labor government, perhaps even Prime Minister. It is reassuring to think that should that occur, he at least understands some basic economics about Australian farming.
And it might help if those on the other side understood too.
David Leyonhjelm has been an agribusiness consultant for 25 years and was recently elected to the Senate for the Liberal Democrats. He may be contacted at firstname.lastname@example.org