It’s the Ma and Pa of it

Howes' key point, that policy should not concern itself with non-viable farms, was exactly right

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 reclaimfreedom@gmail.com

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FarmOnline
David Leyonhjelm

David Leyonhjelm

has worked in agribusiness for 30 years and is a Senator for NSW representing the Liberal Democrats.
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READER COMMENTS

John Newton
23/12/2013 5:17:37 AM

Here he goes - Mr Bigger is Better. I know plenty of small profitable farmers, they're clever, not just bashing out commodities.
Jed
23/12/2013 5:32:12 AM

God help us. David you are out of touch with the real situation and are relying on dodgy figures to present you case. If you talk to real farmers you would get the true story and not that of big business wanting control of the food producing sector. You are have been sucked in by those who want to control the world's food resources. Get a real job and stop loading hard working Australians up with your BS.
Dan
23/12/2013 5:48:15 AM

Sorry David, I can't really agree with you on this one. Just because your a big corporate doesn't mean your going to be profitable in agriculture, just have a look at how many in the big end of town that have recently come and gone. The smaller farmer that has other income I would say is quite smart, some would call this diversification. I don't believe in propping up farmers with hand outs but the well run family farm business will always have its place in agriculture.
deane murray
23/12/2013 6:42:08 AM

Very shallow crap David. You overlook far too much to reach your self serving conclusion.
laughable
23/12/2013 6:46:37 AM

David just in case you did not notice, CBH WA is a grower owned Co-op which has just passed it biggest ever record of harvest receivals. They did that without any foreign ownership. So shows it was not the lack of an ADM as the problem for GrainCorp but the wrong structure along with the wrong management strategy. You are too one dimensional David.
Hydatid
23/12/2013 7:22:40 AM

Critical issue here is anyone has a right to do as they choose with their farming future...get big, get out, stay niche, stay small, farm part time...whatever! Its when tax money gets directed at preserving a particular model that things get tricky. Drought assistance is probably the most visible of these distortions when the most efficient producers in terms of both production and financial management are discriminated against in favour of the less efficient. Begs a larger social question tho!!
Mal Content
23/12/2013 7:31:11 AM

Howes' only interest is to strip away the concept of private property ownership and initiative motivated producers, and this is best achieved in a conglomerate unionised production system where individualism is despised and discouraged and beaten out of those who would dare to dissent. There is much talk around about farmer "handouts" from government, and "taxpayer support".... would someone care to enlighten me on the detail?
cv
23/12/2013 7:31:22 AM

I'd rather have support provided to the ma and pa farmers than to real estate investors. At least ma and pa are producing something. The billions of dollars supporting negative gearers provides nothing whatsoever except high property prices.
stockman
23/12/2013 8:25:06 AM

Someone has to produce the food eaten by would-be senators and union heads.
J
23/12/2013 8:31:12 AM

Glad to see all the comments disagreeing with the points in this article. Any business is more profitable in large scale (economies of scale), and not many doubt that, but there are so many other issues that are being ignored. Least of all (in my mind at least) are the social issues involved when farms are taken out of the hands of families and placed in the hands of companies. And as mentioned above, off farm income shouldn't be seen as a negative. How is it different to any other person having 2 jobs? Not all of us are lucky enough to earn $100,000+ a year!
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Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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